The AFR has produced an alarming report on the rapidly declining levels of housing affordability across Australia:
Buyers with $550,000 to spend – the average first-buyer loan – could buy in just 20 Sydney suburbs last year, 10 per cent of Greater Sydney’s 202 suburbs, down from 40 in 2012, data from PRD Nationwide shows…
“For Sydney, the numbers are just amazing,” said Diaswati Mardiasmo, PRD Nationwide’s national research manager. “If you have $1 million you can afford 49 per cent of Sydney but if you cut it down in half to $550,000, you can only afford 5.4-10 per cent. That’s a massive drop in terms of affordability”…
Affordability has also worsened in Perth, Brisbane and Adelaide over the past two years…
The report goes on to show how $550,000 will purchase homes in just:
- 22.4% of suburbs in Melbourne;
- 42.2% of suburbs in Brisbane;
- 27.5% of suburbs in Perth; and
- 32% in Adelaide.
It’s a crazy country that we live in when $550,000 is considered the threshold for first home buyer affordability. In reality, this price level is still highly unaffordable, and yet it will buy you only 5.4% to 10% of homes in Sydney, and around one-quarter to one-third of homes in the other major capitals (a little better in Brisbane).
Seriously, anyone that still claims that housing affordability today is no worse than previous generations (I’m looking at you Malcolm Maiden), needs to have their head read. The evidence is irrefutable that current housing affordability levels are woeful.
Thankfully, peak community and housing groups recognise just how bad the situation has become, converging on Canberra this week to urge the Federal Government to work with them in developing a national housing strategy to address the worsening housing affordability crisis in Australia. From Pro Bono Australia:
The groups have released An Affordable Housing Reform Agenda – outlining reform priorities for an efficient and affordable housing system that they say strengthens productivity and participation.
Groups include the Australian Council of Social Service (ACOSS), National Shelter, Homelessness Australia, the Community Housing Federation of Australia and the National Association of Tenant Organisations…
The Affordable Housing Reform Agenda document says that although it is fundamental to economic participation, affordable housing is not currently considered by Governments to be part of the nation’s infrastructure agenda.
“As a result of this broader disconnect, many of the policies pursued by Australian Governments in the name of housing affordability serve to increase demand for housing, while failing to tackle the regulatory and cost barriers to housing supply,” the document said.
“These housing market failures need to be addressed if Australia wishes to increase national productivity.
“While the responsibilities for affordable housing and homelessness are shared between the three levels of Government, each level has historically looked to blame the others for the failures of the housing and homelessness system.
“This has contributed to policy paralysis and undermined efforts to collaborate and coordinate policy. The current review of the federation shines a spotlight on housing and homelessness policy and provides an opportunity to grapple with these complexities at a systemic level”…
“The reality is that the housing supply shortfall is becoming a serious brake on productivity. The current policy and tax mix distorts investment decisions, is a barrier to workforce participation and mobility and contributes to house price inflation leading to greater inequality and social exclusion.”
“There is a shortfall of 600,000 affordable houses across Australia and this will only get worse as the population grows,” CEO of Homelessness Australia Glenda Stevens said.
Spot on. We all know what needs to be done to fix Australia’s housing mess: abandon policies that artificially juice demand (particularly speculative demand) and free-up supply-side barriers.
The Federal Government obviously has control of the demand-side levers (e.g. tax rules, immigration policy, home buyer subsidies, etc) but it should also take the lead on supply. Given that the feds control the lion’s share of the nation’s tax take, they have ample opportunity to drive reform by offering incentive payments to the states to free-up land supply, relax planning, and build housing-related infrastructure. It is the federal government, after all, that has decided to run a high immigration program, so the least it could do is provide the states – the ones responsible for service delivery and infrastructure – with the means to cope with this growth.
None of this is rocket science. Time for action.