Will Wage Changes Impact the Property Market?

For many of us a new financial year simply means it’s time to work on our taxes. Beyond this it may not feel like much of an event. However, the new financial year is incredibly important for some of our biggest economic decision makers and you’ll often find changes in wages, taxes and for businesses happen around this time.

This year saw big news for wages from July 1st onwards.

More specifically, changes have been made to our lowest paid workers with a 2.5% increase to the minimum wage. That’s $20.33 an hour and $772.60 a week or $40,175.20 a year for a full-time employee working 38 hours a week.

So, how will this affect the Australian economy and more specifically Australia’s property market? 

First of all, an important factor to note is that this change to wages is unlikely to have adverse effects on employment levels. Incremental changes to the minimum wage have been shown repeatedly to have little effect on the job destruction rate according to the Reserve Bank of Australia (RBA). 

While it can be difficult to predict the exact impact for job seekers, analysis from the RBA has found that the predictable, incremental changes made to wages in Australia rarely affect ‘job keepers’. The impacts of a wage increase during these unusual times is, of course, necessary to take into account, but only time and further economic analysis will be able to tell what exactly the impact of COVID-19 and lockdowns in Australia will have for workers.

What this change does do,  is begin the process of closing the gap between wage growth and property prices in Australia. Government incentives and low interest rates are powering the market right now and even with recent lockdowns we are seeing the Sydney market remain steady, with plenty of buyer interest still present. In November 2020 a record $23.96bn in new housing loans was taken out and CoreLogic data shows us that Australian dwelling values finished 13.5% higher for the financial year with our busiest auction markets since 2017. 

Buyers certainly haven’t been slow in coming forward in the property market over the last six months and for some first home buyers it can be hard to keep up with the growth. This increase in wages, though incremental, could give new buyers the push and security they need to dive back into the market. Those already in a full time job will be the most positively impacted by the change 

For renters too, this change is expected to increase security. Tenants today will have better backing to meet Sydney’s rental market. And, of course, this is positive for those landlords struggling to find the right long-term tenants for their investment property.

So, even if you think this minimum wage decision doesn’t affect you, it may be that it doesn’t affect you directly. Indirectly, changes to the Australian economy and the mindsets of both buyers and tenants nationally and more specifically in the Sydney market could make a remarkable difference to your property journey.

Get in touch with us today to learn what you should be considering about these changes when making a move in the market.