Housing Affordability in Australia
Posted by Hillbrook Projects on 21 July 2022
Australia has recently been facing a lot of heat regarding skyrocketing interest rates and how it's been so difficult for many to acquire a residential property. People struggle to find a decent home because of how expensive it is, and this problem isn't isolated to Australia. It has been a problem for so many countries as well. Australian Bureau of Statistics revealed that while residential housing in Australia was able to pass the $10 trillion mark from the beginning of 2022 to March this year, the central bank announcement regarding interest rate hikes would have a chilling effect on the property market. Meaning that buying property is going to be a lot harder for many.
For the past 10 years, Australia has had issues providing people with affordable housing due to several factors. You can blame this on the unprecedented increase in property prices, especially in major cities such as Sydney, Melbourne, and New South Wales. These three cities have the most influence on the housing market.
AFFORDABLE HOUSING DEFINED
Affordable housing is a type of accommodation that caters to low to the middle-income household. Affordable housing properties would be considered inexpensive to a vast majority. In other states, affordable housing is managed by private organizations and even non-profit ones. In Australia, these are typically funded by a program called the National Rental Affordability Scheme.
Having a safe and stable shelter is part of our fundamental human rights. Sadly, acquiring a home hasn't been a walk in the park for many Australians.
Why is this such a big issue? The simple answer is that we all deserve to have a place we can call home that is not just affordable but safe as well. Unfortunately, many are facing the challenges of having access to that. It has even come to a critical point that is impossible to be overlooked.
FACTORS THAT AFFECT HOUSING AFFORDABILITY
Low Salary Growth
One of the most apparent reasons Australians are finding it difficult to afford a residential property is because of stagnant salaries in the country. Reserve Bank of Australia and Treasury have agreed that the country's low wage growth can significantly drag the economy. We know that when properties continue increasing while salaries don't change, it will be even more challenging for people to make that investment. Experts have pointed out that the low wage growth didn't happen by accident. It is caused by a system issue yet to be resolved.
We could also say that the country's migration levels have significantly affected housing affordability. Back when COVID wasn’t a thing, overseas migration kept putting pressure on housing affordability. Australians had to compete with other nationalities for the desired residential accommodation, which caused a shortage among the population. However, when the pandemic hit the country, migrating workers and students diminished due to closed borders to prevent the virus from spreading even more. For these reasons, investing in property seemed to be unappealing to many.
Supply and Lending
Social housing is one of the best solutions to combat problems in housing a population. Unfortunately, the supply has been inadequate over the years, so many have resorted to rough sleeping. Homelessness is caused by many different reasons, including mental health issues, but there isn't enough available social housing to accommodate several people with limited capacity, to begin with. The lending rates also make it hard for those to secure funds to purchase a home because the prices are too high. When these two factors are joined together, housing affordability is affected dramatically.
Undoubtedly, the government needs to step up in making policies to make housing much more available for the majority. Initiatives and grants are helpful for a while, but the long-term plans will ultimately matter.