09 Feb Banks move to close a loophole + Auctioneers tactics revealed + The world is not fair!
We discuss with buyers agent Cate Bakos, the contrast for buyers when buying in a seller’s market vs a buyer’s market, how tactics need to be different, how agents and vendors behave and understanding the differences in the data and auction clearance rates.
Westpac is closing a loophole to stop property buyers using a combination of personal loans and mortgages to fully fund deposits, or top-up shortfalls if off-the-plan apartments are revalued by the bank at less than the purchase price.
It follows an internal review that concluded top-up personal loans are not “genuine savings” and “unacceptable” as a buyer’s contribution to a loan application. Andrew Mirams looks at the impact of this move.
We look behind the scenes of an auction to discover how auctioneers prepare for an auction, how they structure the call and what tactics they use to get a sale. Auctioneer David Holmes joins us.
A century ago the average Aussie was a 24-year-old male farmer. Fifty years ago it was a 29-year-old male office clerk. But today it’s a 38-year-old female sales assistant. Demographer Mark McCrindle paints a wonderful picture of how our lives have changed in the last 100 years and how that has molded the future of housing.
Just eight of the richest people on earth own as much combined wealth as half the human race. That’s right – they own as much wealth as the poorest half of humanity – that’s 3.6 billion people represented in the bottom half who’s average wealth works out to less than $120 per person. So what’s happening? Michael Yardney helps us understand.
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Buying in a buyers market vs sellers market – Cate Bakos
Kevin: Joining me now is my guest Cate Bakos, a buyer’s agent from Cate Bakos Buyer’s Agents.
Good day, Cate. How are you?
Cate: I’m good, Kevin. How are you going?
Kevin: Fantastic, thank you. Nice to be into 2017. I want to ask you a question that I’m sure you’ve faced from time to time and I get asked quite often. We talk about buyers’ and sellers’ markets, but how should buyers and sellers – buyers in particular – be reacting in those different markets? Should they act differently, Cate?
Cate: They sure should. We have some very noticeable traits for each of the sellers’ and buyers’ markets, and it can really determine how patient or what sort of move is required for a buyer, whether it’s taking your time to analyze the appropriateness of the property over a longer period of time, how you might commence negotiations, how you’ll deal with the agent versus having a fair bit of time pressure and needing to make a quicker decision on the basis of all of the information at hand, because the two markets can certainly make a big difference for any buyer.
Kevin: Yes, I can understand that agents would certainly act differently in buyers’ and sellers’ markets, just dependent I guess on how much control they have, and if they’re in a sellers’ market and when they work specifically for the seller, I guess they’re going to feel like they are in a lot more control, Cate.
Cate: They’re certainly spoilt with strong buyer numbers and some really unprecedented strong sales results. An agent in a sellers’ market will be finding that they need to have listings on hand for the buyer demand. So you tend to find the agent’s energy is spent chasing listings in that sort of market.
It doesn’t mean that they don’t service the buyers well, but they have more time in a buyers’ market and need to change their focus to be there for the buyers and to try and get the sales across the line. The difference in agent energy is really noticeable, because in a sellers’ market they have to find the properties. They have to get a listing.
Kevin: Yes. It would also vary a lot, I would imagine, as to how you negotiate with an agent in that environment as well because they have a lot more control in a sellers’ market, don’t they?
Cate: They do. They won’t be quite as negotiable. They’ll most likely run an auction property all the way through to auction, particularly if they feel comfortable and confident with how the campaign’s going. And they won’t be so excited about presenting a low or a moderate offer to a vendor in a sellers’ market. They’ll expect to present a strong and competitive offer.
So the way that you pitch your first offer or the way that you negotiate has to really take into account what sort of market you’re in, because you don’t get an opportunity to get cute or to toy around with lower offers in a sellers’ market. The property will be sold to the next person.
Kevin: I guess you have to bear in mind, too, as a buyer’s agent you’re representing the buyer. You’re then having to negotiate through an agent to get to the seller.
Cate: Very much so.
Kevin: Your tactics would vary, as well, I would imagine. It would be very different in those two markets, Cate.
Cate: They will. In a buyers’ market, you have a bit more of a luxury to try and see where the vendor’s acceptance point might be, as low as it can be. And in a sellers’ market, if you risk doing that, you risk losing the property altogether because there are other buyers lining up around you and it’s a fast-moving pace.
In particular, you have to face auctions a lot more in a sellers’ market. So being able to negotiate prior to auction is not even an option in a sellers’ market sometimes. So I have to take into account not just whether it’s a buyers’ or a sellers’ market, but the popularity of that campaign, as well. Sometimes there are mini gluts of properties or you have mini droughts. Even in a sellers’ market, you might have a buying opportunity and vice versa.
Kevin: Do you look at data differently in those two different markets, as well? There is a lot of data that’s available; we promote it in this show here. But do you look at different data dependent on the market?
Cate: We certainly do. You have to understand how to segment some of that data, because an auction clearance rate is a valuable piece of information but when you can break it down to dwelling type, as well, and understand exactly how apartments or townhouses or villa units are fairing in that market, and keeping an ear to the ground and staying in touch with local agents and seeing what other competing sales are going on at the same time are all micro pieces of information that are really important.
Kevin: Cate, always great talking to you. Thank you so much for your time. All the best, and look forward to talking to you during the year.
Cate: Same here, Kevin. Thank you.
Banks close investor loophole – Andrew Mirams
Kevin: I was interested to see during the week that Westpac is closing a loophole to stop property buyers using a combination of personal loans and mortgages to fully fund deposits or even to top up shortfalls if off-the-plan apartments are revealed by the bank at less than purchase price. Andrew Mirams from Intuitive Finance, a regular on the show, joins me.
Andrew, thanks for your time and welcome to the show once again.
Andrew: Thanks, Kevin. Pleasure.
Kevin: Interesting, this. Alarm bells seem to be going off a little bit. What’s behind this?
Andrew: Probably the bank has… And Westpac has been the last one to move. The others have all closed these loopholes as part APRA’s looking into, I guess, just responsible lending. They’ve just shut down the ability to make a personal loan and personal lines of credit [0:58 inaudible] as genuine savings.
Whenever is someone is looking to buy a home, they have to have at least 5% of genuine savings, so what the banks and regulators and everyone is looking for is clients aren’t over-committing themselves. And by doing that, by being able to prove the genuine savings test, that they’ve been able to start to put some money aside, and there, they take from that a bit of a viewpoint that they should be a good credit risk in terms of meeting their loan repayments in the future. If you start to mix aggregate debts and things like that, it’s harder to get a true form of whether they’re going to be able to do that.
Kevin: Just making it a little bit harder all the time, I guess, for investors, isn’t it? It seems to be these levers that they’re pulling to try and get some control over increased prices, Andrew?
Andrew: Absolutely. And in days past, just pre-GFC, we had 105% and 110% home loans, 100% home loans were existent. Part of that clean out, it got rid of all of those. There were a few little loopholes that were brought in for people such as high-income earners who had separated from a partner and were trying to reestablish into the market. They had good incomes but because of circumstances didn’t have the access. These things were brought into play.
They have probably been used more recently as the markets have grown and people have found it harder and harder by some banks and strategic brokers out there just trying to really help clients get in in any way shape or form to get there.
I don’t think it’s a bad thing and the bank bashers will probably say, “The banks want it all their way.” This isn’t a bank restriction. This is very much brought down by the regulators sitting above, that we’re seeing changes being enforced over the last 18 months and probably still have a little bit to go.
Kevin: Andrew, could this also be a sign that the regulators think that rates are on the increase and they could be a bit concerned that people may be borrowing too much and not going to be able to repay some of these loans back?
Andrew: Yes and no, Kevin. Yes, of course, we’ve had record low interest rates, so there’s no doubt that with low interest rates, if we get a couple of increases then what’s the jolt going to be? Are people going to be able to afford that?
Why I say no is the bank servicing rates and the way you’ve gone in and asked for a loan from a bank, they’re still being serviced. The majority of their loans that are around 7.25 up to 8% depending on the lender. They actually have that factored into their servicing calculations and are doing that to make sure they’re not over-committing people.
The rates are there, so they’re already servicing in that. I think there’s a bit more workaround just analyzing people’s expenditure and making sure that their lifestyle actually meets their income requirements and then their ability to fund their debt.
Kevin: Are there many 100% home loans at present?
Andrew: Not that I’m aware of, Kevin.
Andrew: Look, we don’t lots of just first-home loans and things like this, and I’ve seen in some of the reports and a lot of people have made a bit of noise about that, and they’re probably people who work in those markets trying to get people in. That’s not really a market that I do a lot of work in.
There’s no such thing as a 100% home loan where you can get a home for $500,000 and borrow $500,000. That’s was closed down after the GFC. Just pre-GFC, though, there were loans available up to 110% of the value of the property on the old premise that property always goes up. We saw through America and the UK and parts of Australia even when the GFC came through that that’s a fallacy. It just doesn’t work just like that.
Kevin: We’re talking here about Westpac doing this. Are there any indication the others are likely to follow suit.
Andrew: The other lenders have already probably done it more. They were less aggressive in doing it and weren’t really doing that. Westpac had seen this is a bit of a niche in their market and the ability to provide this and do things like that. It’s just now they’ve been alerted to it by the regulators, and they’ve said, “Okay. We probably agree. That doesn’t fit the full piece of responsible lending practice.” They’ve just shut it down for now as the regulators continue to take a stronger hold to ensure that the market doesn’t enter a boom-bust cycle.
Kevin: Yes. How are brokers generally reacting to this type of tightening up because it’s been going on for a while, hasn’t it?
Andrew: Yes, it has been. You’re right. Like I said, there are banks and brokers that have advocated doing this and just getting that little bit extra, $10,000, $15,000, $25,000, $30,000 –whatever it might be – on a personal loan to get them in to fund their stamp duty or something.
That’s part of the frenzy of what the regulators don’t want people to commit to if they can’t save the money and they don’t have other means, then taking more debt just to get in because of otherwise “We’ll miss out on the market,” I think probably isn’t a bad thing.
Hopefully, it will save some people from some potential gloom if we do get rate raises and they can’t manage all their debts, because a personal loan is generally taken over somewhere between 5 years to 7 years, maybe up to 10 years depending on the lender. So it has a higher interest rate and a shorter repayment period, so that coupled with then your mortgage expenses if the rates start to rise, I think it can put people at risk.
My personal opinion is I don’t think it’s a bad thing, but will it mean some people will miss out? Yes, it will, but arguably they’re also saving them from putting them at risk at well.
Kevin: Yes. We have a history – haven’t we – of a really good banking system, tight regulations, and we shouldn’t complain about that, and I know you’re certainly not doing that. But is this the new norm – that of increased deposits, good record of saving, the ability to even service higher interest rates? Andrew, is that the norm going forward?
Andrew: Yes. I think it’s going to be, Kevin. I think at least while we still see, in particular, the two major capitals in Melbourne and Sydney really performing strongly. I think there will be continued concern that we don’t want people just rushing in and buying. I think there will be more scrutiny.
Like I said, there’s a lot of work around just being able to analyze people’s actual spending habits and their consumption; what they actually do spend on a monthly basis and not overcommitting them. I think we’ll see continued work around interest-only piece and especially people wanting an interest only home loan and things like that.
I think the scrutiny around those that we’re not overcommitting people, in the long-term, it might be okay and affordable today but what about in three or five years when an interest-only term has come off. You have potentially higher interest rates. You might have been a couple then but you’ve gone back to one wage because you’ve had a baby and things like that, and all of a sudden, you just can’t make your commitment.
That’s why the regulators are working hard to make sure that the market remains strong and consistent, again, to avoid that boom-bust cycle.
Kevin: Well said, mate. Always good talking to you. Andrew Mirams from Intuitive Finance. Thanks for your time, mate.
Andrew: My pleasure, Kevin. Have a great day.
The rich get richer – Michael Yardney
Kevin: Not sure if you’re aware, but did you know that just eight of the richest people on Earth own as much combined wealth as half the human race? That’s according to a recent report by Oxfam. A really interesting study, and I want to get the feedback here from Michael Yardney.
Good day, Michael.
Michael: Hello, Kevin.
Kevin: Michael from Metropole Property Strategists, of course, a regular guest on our show.
Michael, should we be concerned? Is it disturbing that so few people have so much wealth?
Michael: I can understand why it concerns people, and an Oxfam director came out and said it’s obscene so much wealth is held in the hands of so few. I think there’s another way of looking at it, Kevin, that yes, there will always be a disproportion, but let’s have a look at what these wealthy people have done for the community instead of looking at what else we could do.
Kevin: Okay, let’s do that. That’s a very positive thing to do.
Michael: It’s easy to point a finger, it’s easy to say that they’re taking advantage of the tax system or that the system is unfair, but let’s not forget all the jobs they’ve created in the various companies owned by these people who create economic activity by providing goods and services.
And instead of demonizing them, I think what’s also interesting, I did some homework and research to see how philanthropic they are. Can I quickly go through that, Kevin?
Kevin: Please. I think it would be very helpful. Thank you.
Michael: They’re billionaires and they were born at the luckiest time in history, and six of them are hailing from America, which is the wealthiest country in the world. But when you look at them, the first one is Bill Gates.
He’s co-founder of Microsoft, the richest man in the world. But you probably have heard that he set up the Bill and Melinda Gates Foundation, who so far have donated $30 billion – not million – because their core belief is that giving people the tools to gain a healthy life rather than giving handouts is going to help them.
The number two person on this rich list of eight billionaires was Amancio Ortega, the founder of Zara Clothes. Similarly, he set up the Amancio Ortega Foundation, which only last year gave 25 oncology radiotherapy units to hospitals in Spain at the value of 40 million euro.
Warren Buffet is on the list. He’s 86 years old, and every year, he donates money. Last year alone, he donated $2.86 billion of shares in Berkshire Hathaway, plus he’s set up the Giving Pledge Foundation with Bill Gates, allowing and encouraging other wealthy people to continue giving money during their lifetime.
Number four on the list of these wealthy eight people is Carlos Slim, the Mexican business magnate who owns one of the big telecommunications companies there. He has just recently given $4 billion worth of investments, and he’s got another $6 billion that he had donated to charity.
Jeff Bezos, the founder of Amazon, is worth $42 billion, and he has donated to many nonprofit projects.
Mark Zuckerberg, who founded Facebook, number six on the list, is a major philanthropist. He has pledged to give away 99% of his Facebook shares to charitable causes.
Larry Ellison, the founder of Oracle, and Michael Bloomberg and other people who make up the list have all similarly done this.
So, Kevin, what does all this show? I think it shows that wealthy people recognize that true wealth has nothing to do with how much money you have or how many properties you have or how many businesses or shares; it actually shows that in their life, they have recognized the importance of paying it forward and helping other people and giving back to the community.
Kevin: Yes. It’s interesting reading a little bit further into this information from Oxfam. They say that the bottom half, the average wealth is less than $120 per person. It is such a wide gap, isn’t it?
Michael: It definitely is, but I think the other thing to remember is that while these wealthy people were doing so well and building their wealth, the poor people in the world over the last couple of years are more and more being pulled out of poverty. Look at all those people in China who have moved from rural China, farms and the rice paddies, to cities. There has been a lot of middle-class wealth created in the world, as well.
So let’s not forget these billionaires and all other entrepreneurs around us have become wealthy by growing businesses, by employing people, by creating value, and making your and my money move through the community.
So in my mind, we should have more businesspeople and applaud them. I’m doing my best bit at running my little business, and I know you are too, Kevin. I don’t think we should knock or be jealous of the wealthy people.
Kevin: No, definitely not. We should look at them for inspiration, I would have thought. Michael, always good talking to you, always make a lot of sense. Thank you very much. Michael Yardney from Metropole Property Strategists. Thanks, Michael.
Michael: My pleasure, Kevin.
What Auctioneers get up to – David Holmes
Kevin: This week in the show, I want to take you behind the scenes. How does an auctioneer structure an auction? Who are you up against when you’re going to buy at an auction? And to help me with this dialogue and with this understanding, David Holmes from Metro Auctions joins me.
Good morning, David.
David: Good morning, Kevin. Great to be here.
Kevin: David, one of the things that I’ve noticed about the auctioneers who I’ve met – and I’ve been an auctioneer myself – is that adrenaline rush that they get. I guess in a way, they’re not putting on an act but they’re on stage, so they really have to put on a bit of a performance, don’t they?
David: Most definitely. Our job is to either make the property sell or to make it more saleable, and we have a duty of care to the vendors there to sell the property, to speak of all its very positive attributes, and to engage the crowd and to make them want to buy. The best part about an auction, obviously, is competitive bidding, even in an oversupply situation.
Kevin: But you have to get the people there to bid, and that’s always the difficult part.
David: Yes, most definitely. It has a sense of urgency around it, I think, especially in an oversupply situation. You’re putting a date on the sale, so the control of the transaction is back in the hands of the seller or the vendor. They’re actually saying that they want to sell on a particular date, at a particular time, via their particular terms. So even though there might be fewer buyers, those buyers are still flushed out to that particular date and forced to act or forced to play on that day or soon after.
Kevin: In an oversupply situation, you can’t take away from the fact that if there’s a big choice, someone is going to say, “Well, that’s okay; that can go to auction but I have a big choice. I’ll just go along and see what happens.” Or do you find that a good agent’s going to make the difference in getting people to bid?
David: Absolutely. A good agent is going to engage buyers and get them there on the day. We still see that in South East Queensland, a property that has gone through an auction process has significantly less days on market than a property that has just been marketed via a price. So no-price marketing – i.e. auction or tender – is still going to yield a better result – especially auction – by far less days on market.
Again, it flushes out people to a date. And even if they’re unable to purchase under auction conditions on the day, we see a lot of transactions happening in those 14 days directly after an auction.
Kevin: There’s no doubt – I’m not questioning at all what you said, because I know it’s true – that an auction will sell faster than a property marketed at a price, and I sometimes wonder whether that’s because the pressure comes back onto the agent. They have the timeframe. I know we talked there about the buyers; there’s a deadline for the sale, which is the auction date. But by the same token – having been an agent and run auctions – there’s a lot more pressure in running an auction campaign than there is for one that has a price on it.
David: Yes, absolutely. But I think at the end of the day, the vendors then have an overwhelming weight of information. Perhaps they’ve had some offers prior to auction day. Perhaps there was some active bidding on the day and maybe it still didn’t sell or even if it got passed in. But again, it’s flushed out some buyers to that date.
Yes, there’s pressure – I understand – on the agent, but then you actually have some ready, qualified, buyers who have actually fronted up on the day, said that they can bid to buy, and then you can continue working with those buyers in the coming days and likely get a deal done.
Kevin: It must be frustrating for you as an auctioneer working with agents who just simply don’t understand how to work the auction system and get the buyers there. They think, “Oh well, all the magic’s going to happen on the day of the auction. It’s all up to the auctioneer. Pull that rabbit out of your hat and let’s see what you can do.”
David: It would be easy if I drove around with a courtesy bus full of buyers at every auction. There is pressure, and a good agent knows how to engage the buyers, knows how to get them there on auction day, has the correct dialogue, and also follows a process by which to get those buyers there.
Kevin: Has it made it harder for you not being able to take bids off trees and people who aren’t there?
David: Low-flying birds and moving trees and leaves flying through, yes. At the end of the day, I think it’s probably become a more transparent process. In the interests of trust and reputation, I think that’s a very, very key thing. Clarity and transparency for our buying public is very important.
The ability to use vendor bids – which is I guess what you’re aiming at now, and they have to be disclosed – I should think is a very positive thing. We probably refer to them sometimes more as momentum bids.
Kevin: Dummy bids.
David: Well, momentum bids. We declare the vendor bids, Kevin. It’s not like the old days. What you’re actually doing is you’re actually saying, “Hey guys. You’re getting closer to the zone.” This is a very clear indication, a signpost on the road of negotiation, if you will, as to where you might be able to purchase the property. We’re going to give you a very clear indication where you need to go.
Kevin: That’s the key thing isn’t it? You’re not going to be able to buy it under the reserve unless the auction is stopped and the reserve is lowered. Therefore those vendor bids – or those momentum bids, as you call them – are fairly irrelevant in terms of their importance to the buyers. It’s an indication to the buyer that you’re not going to be able to buy it at that figure, so come on, let’s start negotiating. That’s what it’s all about, isn’t it?
David: Absolutely. It would be no different to me under a price-marketed property, stopping and having a chat to the buyer who might have put in their initial offer and me coming back saying, “Actually you’re not going to buy it at that price. Here’s the counteroffer from the vendor.” Although obviously we’re not revealing the reserve price, of course, but just going back in that argy-bargy process of negotiation and then finally nutting out the deal.
Kevin: Does the auctioneer have that much influence on the day? And how much skill is required to actually get the property sold? Because if you have no bidders there, you’re not going to sell it, are you?
David: Absolutely. If there are no bidders there, we have a tough road ahead, and if there’s no crowd there, obviously. We always talk about three potential outcomes – the possibility that I’m standing there with the agent and there’s no one else, which is not great, the possibility that we sell well over reserve with plenty of competitive bidding and plenty of registered bidders, which is the ideal scenario, but oftentimes, we’re left in a place where we have to do a little bit of extra negotiation – we have some registered bidders, we have a decent crowd, but we just don’t get to where we need to go.
Kevin: Is this when you stop the auction?
David: Yes. We’ll often pause the auction. I think a misconception is that an auctioneer firstly speaks very quickly – that’s not necessarily true – and that an auction has to happen very quickly.
At the end of the day, you have a lot of energy and excitement in the first part of the auction, so you’re wanting to get as much competitive bidding going and getting those juices flowing as early on as possible. But at the end of the day, we’re there to negotiate the highest price. Our charter is very clear. We’re there to get the highest price for the vendor. If that takes 10 minutes or if it takes 30 minutes, we need to be able to pause the auction and use the tools that are available to us in order that we can negotiate that highest price.
Kevin: What do you do, though, if you open an auction and you know there are some bidders there but they’re not bidding? What sort of a strategy do you use to get them to bid?
David: I actually sort of plead with them. I just absolutely beg. No, I don’t. But let’s be honest, we watch the TV shows where the auctioneer calls for that opening bid or offer and there’s a Mexican wave of bids; it’s crazy. I can tell you that it’s very different to that. In fact, possibly probably part of the hardest part of our job is getting that first bid away. So oftentimes, we will often put a bid in or suggest a range at which people might start bidding. Once we have that first bid away, we often find that prompts other people.
We’ve probably had years and years or decades where we’ve just held back a little bit and there’s just a culture of “I’m not going to bid at auction; I’m just going to see what happens.” That’s not a great strategy. A buyer needs to turn up and say, “I’m going to put my best foot forward. I’m going to put my stamp on proceedings. I’m going to put a bid forward.”
There was an independent auctioneer company who actually did a study, and those people who put the first bid forward in just under 70% of the cases were actually holding the keys at the end of the day.
It is a 20-second burst of courage. You do need to have that boldness to put that first bid through. But as I said, most of us like what the rest of us like. Once you know and you have that confidence, you’re probably more likely to bid.
Kevin: It certainly doesn’t hurt to have an understanding about how the whole process works, does it? That’s why we say time and time again if you are going to bid at auction, make sure you go along, get to understand how the auctioneer works, understand how the auction process works, and if you’re not really happy with it, then maybe you should engage a buyer’s agent to help you.
A century of change – Mark McCrindle
Kevin: Let’s have a look at the Australian population – what’s happened to them over the last 100 years? An interesting report written by demographer, social researcher, author, and futurist Mark McCrindle, who joins us on the line.
Good morning, Mark.
Mark: Good morning, Kevin.
Kevin: Nice to be talking to you again. Now, 100 years ago, the average Aussie was a 24-year-old male farmer – probably not a real surprise – but what happened after that? How did they change?
Mark: Well, some of the key demographics are that we’ve got larger in terms of our total size, we’ve got older in terms of our average age, and we actually have more women than men in Australia at the moment.
So, if we were to totally define the average Aussie statistically, it would be a 37-year-old woman named Rebecca, because that was the most common name in 1980 – and 1980 was the Generation Y began being born. Generation Y are not just the younger generation now; they’re right in the middle. You have two generations older than them and two generations younger.
So yes, a 37-year-old woman. It’s amazing when you think we’ve gone from an average age in the 20s to now the late 30s in the span of a couple of generations, but that’s the aging that we’re seeing.
Kevin: What does Rebecca do?
Mark: She would be a sales worker. The sales sector, those working in sales, is one of the largest in Australia, and for a woman, that’s the most common. So, she’d be in that role. She’d be working full time – three quarters of Australians employed work full time. For a woman, probably about 31 hours a week, a male about 41 hours a week. There’s a little bit of variation there depending on who’s the main breadwinner of the home.
The average full-time worker would take home $60,000 if they’re working less than the 40 hours. Might be a bit less than that, but that would be economics of it, and that would be the gross salary before tax.
Kevin: What about housing requirements? How has that changed over the last, say, 50-odd years, Mark?
Mark: Yes, very significantly. Particularly over the last century, we’ve moved strongly from a more regional representation to now very much an urban one – four in five Australians are living in the capital cities – and increasingly densified there.
This average Australian would be living in a three-bedroom detached home, of which they probably have around $400,000 equity in that home. But that is starting to change, as well, and it’s increasingly likely that it might be a medium- or high-density home. We’re getting closer and closer to that transition point.
Kevin: Would the size of the mortgage be growing, as well? I think you said the average equity was $400,000.
Mark: Yes, exactly. If we look at the average capital city house price, it depends on which capital you’re looking at, but in some of the capitals, this equity is not even half of the cost of the home. In others, it might be over the halfway point.
If you bring it down to a household perspective, just to look at what they have to pay down that mortgage in any year, at a household level, after tax is about $88,000. That’s the average household, which has more than one income. So after tax, that’s what we have to live on and pay down that mortgage. So, it is increasingly a challenge to get ahead in terms of the equity in that home.
Women have really increased participation in the paid work labor force and have closed that gap – not fully closed, but certainly closing the gap a bit compared to the male participation. Not quite as high as male participation, but getting there.
Interestingly, when you look at the total hours worked – which includes a measure of both the paid work outside the home and then the unpaid work, which is everything from the domestic duties, outdoor work around the home, the childcare role – the average woman is working more hours than men. That’s about 60 hours a week in total.
So, women are very hardworking in Australia, not only domestically but closing that pay gap, as well, and actually are more formally educated than men in Australia. They’re more likely to have a university degree in Australia than their male counterpart.
And normally, what follows educational achievement is income and leadership and career trajectory, so we’re seeing women really move ahead in both the earnings and the leadership role.
Kevin: Hand in hand with that, I guess, would account for the fact that we now have more cars in the home. As women become more independent and make their own way, I guess the share of household duties and all those things are really creating somewhat of a change in how we live and how we work, aren’t they?
Mark: That is exactly right. If we think about the average household, it has at least two cars, because more than half of all households have two cars or more. On average, every registered car in Australia is driving 14,000 kilometers per year.
It’s pretty phenomenal how connected we are with our cars, how much mobility we have, and of course, the household with at least one car, which the average household has – and a pet, as well, by the way. They really do need the cars to get around.
Kevin: Things like speaking English in home, of course, we’ve seen a lot of people… And I think you mentioned it in the report about Haymarket in Sydney for instance, 88% of the population were born overseas. All of these things shape how we live, how we talk, and how we communicate.
Mark: Exactly. We’re far more diverse than ever before from a cultural perspective. Australia is home to more than 300 different ancestries. That’s what we trace ourselves back to. And we’re fast closing in on the point where we’ll actually have more households that have a parent born overseas than don’t.
At the moment, 46% of households – so not quite half – have at least one parent born overseas. We’re getting close to that point where at least half will have someone born overseas. 28% of us, so more than one in four of us ourselves were born overseas, so very culturally diverse.
And over the last three decades, that migration pattern has shifted from European nations. Now in the top five, we have China, India, and Vietnam as the most likely countries of birth of those Australians born overseas. So, a shift around the world in terms of Asia and their connection there.
Australia is this dynamic land that is changing phenomenally, and the demographics really represent that.
Kevin: How are we doing physically? Is it my imagination, or are we getting taller?
Mark: We are getting taller. The average man is now 178 centimeters tall, weighs 85 kilos. So, we’re getting taller, we’re getting a little bit heavier, as well.
Kevin: I’m a bit above the average there.
Mark: This is a challenge. Something has to give. We’re working longer, we’re juggling more roles, we’re carrying more debt, there’s a bit more stress, and maybe we’re not being as active as we used to in those physical roles.
Now, we’re more likely to have joined a gym. These days, we’re more aware nutritionally of what are the right foods for us, so we’re more educated in that sense. But we’re less likely to be – as you said earlier – the farmer that was the case a while back on average.
We’re more likely to be a white-collar worker, a clerical, an office worker, a managerial type. We’re just not getting as much mobility as part of our natural day, so the average male and female has a body mass index – that BMI – of just on the 25 mark, which is officially declared as overweight, anything 25 or above. So we’re just tipping the scales in the start of that overweight category on average.
But we’re doing a lot of right things. The average Australian is exercising three times a week. We’re getting 7.2 hours of sleep in a night – not quite the eight hours, but the medical experts say that that’s adequate. And the majority of Australians have health insurance, so we are looking after ourselves. Perhaps a little bit more to do, but we’re on track.
Kevin: Project ahead. What do you reckon we’re going to be looking like and what sort of houses will we be living in in the next 50 years?
Mark: I think over the next half century, we’ll change that balanced, and it will more likely that when we do this again, talking about someone… And in 50 years, it will be maybe Oliver and Charlotte; those are emerging names today. And they’ll be most likely living in a more densified dwelling, perhaps a townhouse or an apartment.
They will have a bit of equity, but a lot more people will be renting not owning, and choosing that lifestyle. They’ll be moving ahead, certainly more geographically mobile, and their careers and where they study will not just be here in terms of nationally defined, but globally defined.
I think Australia is in this great position – our location in the world, our diversity, the cultural connection, the relaxed way of life that we have, and yet the hard working and formally educated background we have places us in a great place in the future to continue to be those world influencers. So, I think the future trajectory looks pretty good.
Kevin: You’re talking there about more people renting, and I tend to agree with you, but it brings about the question who is actually going to own the house? Is it going to be more social housing, or will there be an even greater divide between the haves and the have-nots? We’re already seeing this divide between the haves and the have-nots, a smaller number of people owning a larger portfolio of houses.
Mark: Yes, there is going to be in that, the investor there with the property ownership. And a lot of people as choice renters. They’re not renting because they can’t afford to buy, but this emerging generation will just be happy to rent because they want the flexibility that that provides, and they’ll be investing in other categories perhaps, or you’ll just have different ownership forms. Someone’s name might not be on the title because their parents have helped out, or maybe siblings have come together to own that place. So, it’s just a new way of funding the growing cost of housing. Still giving the security,
Australians are really rusted onto that Aussie dream of home ownership, so that’ll still be strong in our psyche, but as the costs increase, there are new ways of covering the finance.
Kevin: Mark, always fascinating talking to you. Thank you for giving us your time this morning. Mark McCrindle, demographer, social researcher, author, and futurist. We’ll talk to you again soon. Thanks, Mark.
Mark: Thanks a lot, Kevin.