Housing affordability is likely to be an issue for at least 40 years according to a new report by the Committee for Economic Development of Australia ( CEDA.)
The report says:
Historically low interest rates, an unprecedented period of continuous economic growth and strong levels of migration have contributed to ever escalating real housing prices in Australia’s capital cities
The rapid pace of house price growth has contributed to growing housing affordability concerns.
Warning that housing affordability is not likely to improve over the next 40 years, driven by population growth in the big cities, CEDA argues that to fix the problem there needs to be better land release, stronger tenants’ rights, a shift to land-based taxation over stamp duty, and increased capital gains taxation.
CEDA predicts that the proportion of people living in capital cities is projected to rise from 66 per cent to 74 per cent in coming decades, accentuating demand for homes and that population growth is set to surge in Sydney and Melbourne, where supply constraints are at their most acute.
CEDA says these trends will not only worsen the gradual deterioration in income and wealth inequality, they will also potentially undermine the productivity of the economy, as lower-income workers struggle to afford housing in big cities.
Of course this doesn’t mean property values won’t continue to increase…they will.
That’s the other side of the “affordability” issue.
The report suggests housing will become more and more unaffordable for the next 40 years due to surging property prices.
Of course there is nothing really surprising about this.
Cities with world-class amenities and restricted planning policies will always face greater demand and supply issues than other cities.
Now I’m not saying this is a good thing – these trends could lead to social problems, but one thing is clear…
Property values will keep rising in our big capital cities because of population growth and the wealth of our nation and because there is a group of wealthy people (including those who already own property) who will be able to, and willing to, pay a premium to live in our capitals.
Of course if you lived in New York or Paris first home buyers wouldn’t expect to be easily able to afford a home – would they?
And Sydney and Melbourne are “Manhattanising” – we’ll have more young people renting as they can’t afford to buy property.
Again this is not necessarily a good thing, but it’s a fact and it does mean that the gap between the wealthy (property owners) and the average Australian is going to widen.
I’m not qualified to discuss the social implications of this, however what I can say is it highlights the importance of developing financial fluency so you can become a property owner and take control of your financial future.
WHAT CAN YOU DO TO STAY AHEAD?
As signs point to softer growth conditions for Australian property over the coming months, independent professional advice and careful consideration will be as important as ever in navigating Australia’s varied market conditions.
If you’re looking for independent advice, no one can help you quite like the independent property investment strategists at Metropole.
Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.
Please click here to organise a time for a chat. Or call us on 1300 20 30 30.
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