Kim Macdonald: How much will homes cost in 2046 and who will be able to afford one?

The year is 2046. Perth — population 3.9 million — has a median house price of $3.3 million.

If that figure blows your mind now, the sad reality is that it will still be considered high enough to blow your brain-computer interface in 21 year’s time.

The figure is based on the current $926,000 median house price and a 6.3 per cent annual growth rate — which is on par with changes in the local property market over the past 21 years.

Of course, that figure by itself says nothing about affordability, given inflationary pressures are such that by 2046 some of us will need to self-soothe every time we fork out for something as small as a cup of coffee ($12.50 a cup by my calculation.)

To understand future housing affordability, we need to consider Perth’s wage growth, which has increased only 3.7 per cent annually over the past 21 years.

This means houses are currently 8.3 times the average, full-time, adult salary of $111,000 in WA, but if we remain on the current housing-income trajectory, it will cost 14 times the annual wage by 2046.

In other words, if nothing changes, a house will be about twice as unaffordable when today’s primary school students go house-hunting.

Clearly, we need to get off the current trajectory.

Property inheritance is already one of the bigger determinants of future wealth — in some cases, more so than hard work, talent or a university degree.

If we don’t make some serious changes soon, in two decades it will most definitely be the single biggest determinant of adult wealth.

The Great Australian Dream — which was once an opportunity for prosperity and security for all — will become the very thing that marks inequality from birth, further dividing Perth into haves and have-nots.

The good news is that getting off this trajectory is entirely possible with a few significant changes in construction, taxation and social attitudes.

For one, abolishing negative gearing on multiple investment properties will go some way in reducing competition against first home buyers.

We also need to embrace cheaper construction methods and higher density.

Double brick is expensive, and arguably, no better at thermal protection than a cheaper brick veneer method, particularly amid advances in insulation and passive solar design.

Alternative construction methods got a fillip in September when Perth witnessed the very first sale of double-storey 3D printed home, which was built by Contec Australia.

While 3D printing is among a raft of alternative construction measures that has been gaining traction in recent years, the sale was a significant milestone for two reasons.

Firstly, it is fledgling proof the alternative construction has market acceptance, with the $700,000 sale price on par with other similar homes in its neighbourhood, in Tapping. This important step will boost support from other developers.

One major developer recently said to me, “You’d want to be a second mover on this one.”

The other important aspect of this milestone is that the home was 25 per cent cheaper to build than an equivalent brick home.

These savings were not passed on to the buyer, given the lack of affordable competition, but savings will more likely get passed on as a raft of more economical construction methods grow.

High rise modular apartment blocks are the next step in housing affordability. To date, there are no builders in Perth with the capability, but its existence on the east coast means it is only a matter of time before it hits WA.

High rise apartment complexes also save on land costs per unit.

My guess is that community support for high rise, particularly from older home owners, will grow along with affordability pressures. At some point, people will realise that if their adult children can’t buy an apartment near their childhood home, their only other affordable option is on the metropolitan fringe.

And that’s a long drive to the see the grandkids.

Kim Macdonald is the property editor