Translator: Reviewer: soheila Jafari
Thanks everyone.
I want to tell you how to win an argument against your parents
about housing affordability.
Because one of the things that really keeps me up at night,
aside from the cancellation of the show"Firefly",
is the fact that conversations about housing affordability are dominated
by people who are older than we are, who are largely wealthier than we are,
and who have a lot more knowledge on this issue than we do.
So, why don't we start with what the typical house is worth in Sydney.
In real estate,‌ when we talk about typical values,
we refer to what's called "the median".
The median is when you line up your least valuable properties
to your most valuable properties in your area of measurement.
And you take the middle figure as your central tendency measure.
And the reason we do this
is because properties in real estate can be really unique.
Your highest value property could represent a celebrity mansion.
Your lowest value property could represent an empty car space
that someone accidentally left a creepy dolls' house on.
These outliers can throw off our average.
So that's why the median is a really good indicator of central tendency.
In April this year, the median house
in the greater Sydney metro area was $945,500.
To put that in further perspective, if you guys work a graduate job
or part-time job for $20 an hour, you would have to work
over 47,000 hours just to earn that much money.
That amount of money is enough to buy my weekly groceries for the next 60 years.
It would be longer if I went on a diet though.
(Laughter)
From January 2014 to January 2015,
the median house in Sydney grew by 20%.
In one year, the median house grew by 1/5 of what it was worth
in the beginning of the year.
This is a graph of historical growth rates of the median house in Sydney.
And this is our 20 percent growth rate on the end here.
And this graph reaffirms what a lot of older journalists and politicians
and your parents might say about the housing market.
That Sydney has always gone up.
That the largest housing boom was actually in 1987 when houses went up 38%.
But if you work hard and you save and you sacrifice,
there's no reason you can't buy a house in Sydney, too.
Only talking about percentages is very misleading.
It masks the fact that we are currently
in the worst housing affordability situation in over 3 decades.
And the reason for this is that when we talk
about a percentage value increase,
we're talking about an increase of what the house was worth
at the beginning of the year.
And in 1987 when some of your parents were buying houses,
the value of houses in Sydney wasn't that much.
So the percentage increase wasn't that much.
So let's map this out: If we have a 38% increase of houses in 1987,
they were worth $121,000 at the beginning of the year and grew to $167,000.
These figures aren't adjusted for inflation
so that $160,000 is now about $360,000.
But what does that mean for our percentage increase in 2014 when houses went up 20%?
They grew from $760,000 to over $910,000
or a real dollar value increase of $150,000 in one year.
If we adjust this increase in 1987 for inflation, that's $95,000.
So in real dollar terms, the 2014 housing boom was larger.
The other way that we can think about affordability is in terms of our income.
In 1987 incomes was $21,000 or adjusted for inflation, $50,000.
If we plug that into $167,000,
remember, that's the value of houses at the end of '87,
then we see that the house value was over eight times incomes at the time,
if we move forward to 2014, we can see that the real dollar value income measure
hasn't increased that much:
It's gone from $50,000 in real dollar values
to $60,000 in 2014
and part of that is due to the increased casualization of our workforce.
Today about 30% of our workers are in part-time and casual jobs
as apposed to 15% in the 1980s.
If we take our $910,000 figure and divide that by average incomes today
houses are worth over 15 times the average annual income.
And I think the really frustrating thing about this
is that while there were some non-home owners
who were saving and sacrificing
and working hard like their parents told them to,
any parent who happened to own a median house in Sydney
from January 2014 to April this year
has so far made over $180,000 in their house.
Just for owning a house.
Even if these non-home owner saves half of their income,
who do you think has a better chance at auction?
Make no mistake that people are taking this equity out of their homes
and using it to bid against you at auction.
So, in terms of what we're actually going to do about housing affordability,
I'm not really sure. This is me at the moment -
(Laughter)
It's one of those things where you could go out and you could lobby
for higher housing supply,
or you could look at tax reform for investors
or you could decide that living in Sydney
isn't all that important and just move away.
But no matter what you decide to do, if you don't try and understand
the economic analysis and the numbers that are going into these arguments
you're not going to have a voice in this debate.
We need to become aware about Economics and we need to embrace it as a study.
And it's funny because I know people in this room who can write plays
and build things and make vegan food taste good.
But when we hear a term like "negative gearing" or "capital gains tax"
or "percentage value increase", we let it wash over us and we think,
"Oh, that's out of my depth of understanding" but it's not.
All I did for you today was talk about growth in terms of real dollar values,
in terms of percentages and look how it totally changed the story about
where the largest housing boom has been in the last 30 years.
You can learn about Economics
by taking it in high school or at university;
If you don't want to do that, you can just read The Financial Review or The Economist
or you can google things you don't understand
or you can ask me.
You can find me on Twitter and ask me a question
although I would probably just google it for you.
(Laughter)
At the very least if we embrace Economics, we can explain to our parents
why we still live on their couch,
if you're lucky enough to have a parents' couch to live on.
But at most, we can use these tools
in Economics and we can use it to make real change.
Thank you.
(Applause)