Since Time is Money – money representing a token of value for the time you spend doing something – in theory you should be able to substitute either one for the other, right? Like, if you had all the time in the world, you could in theory make the thing you’re buying instead of paying someone else to have made it.
We can apply that to thinking about housing prices. After all, the price of a house should be proportional to how much it costs to build, right?
According to the ABS, median price for a dwelling in Australia is $623,000. Note this includes all houses and units, all over Australia. According to Domain, in June, the median price for houses in Sydney was $1,021,968.
Minimum wage in Australia is $17.70.
Therefore, what the market says at the moment is that a dwelling – a place to live – in Australia – on average is worth 35,198 hours of work in Australia – barring transaction costs. That’s 4,400 working days (doing a bit of rounding here), or 16 years 10 months of work with only weekends off.
For Sydney, that means the median house is 57,739 hours of work, or 7,218 days, meaning 27 years and 8 months of work.
I can say for sure the houses in Australia don’t take 16, or even 27 years to build. They’re up in like 6 months, max. So the rest of it is time you’re getting from something else – perhaps something ephemeral as the view (time taken to get to a place with a similar view…), or as practical as commute time, or… I’m not sure, but there’s other sacrifices and investments of time that this would represent.
Ok, so it’s a little silly to divide median house price by minimum wage, but if you’ve got a house, or even some kind of dwelling, this is a useful way to recognise the literal effort the walls around you represent.