Housing Affordability is a topic on everyone’s lips at the moment. I found the following commentary by Louis Christopher of SQM Research interesting reading with some sensible thoughts and suggestions. He said:
Housing Affordability in Australia has become a subject of great significance of late – with rising interest rates, the removal of the First Home Owners Boost and the ever increasing levels of stock on the property market.
Now this issue is fraught with many opposing views, conflicting data and now even a string of facebook revolt groups. Both the experts and the amateurs are jumping on the band wagon and we thought it’s about time we joined the conversation as well.
So what is SQM Research’s spin on current housing affordability in Australia?
Do we think it is becoming increasingly less plausible for Aussies to purchase their own three bedroom home on a quarter acre block?
For us the question is less about ‘whether or not’ and more about where.
In previous generations, it was far easier for middle income earners to purchase homes in the inner and middle ring (within 25 km of the CBD) of capital cities as prices in these areas were still more or less affordable for those on average wages.
What has changed is as the population has increased the demand for stock in these suburbs has increased also. This demand has come from a mix of competing affluent income earners and upper- middle income earners.
It starts off with the top one thousand homes generally being only available to the top one thousand wealthy individuals or families. As the population increases, the population of the wealthy increases as well. This means even the wealthy have to compromise.
However this group of affluent income earners are in a position that enables them to comfortably pay more to live in these areas (inner and middle rings), and subsequently property prices are driven up, making it exceedingly harder for middle income earners to break into this sector of the market.
This situation has also been aggravated by the fact that access to housing credit has been far more readily available to the population since the 1980s
The problem with this is that although housing in the outer ring (suburbs beyond 25km from the CBD) is considered by middle income earners to be more affordable (for their demographic), they are reluctant to push outwards as they have grown accustomed (due to status) to residing in the inner and middle rings as their parents did before them.
The inability to afford to purchase a property which their previous generation’s equivalent was able to buy, coupled with their lack of desire to purchase a home in the outer ring, automatically transfers to a ‘housing affordability crisis’.
So, when many of the average mums and dads complain about not being able to crack the housing market, regardless of what should be considered sufficient wages- what they are really saying is that they can’t afford to buy WHERE they want to live.
Therefore, it’s not so much that housing in Australia is becoming unaffordable for middle income earners, it is more a case of average Australians no longer being able to afford property in the inner and middle rings, as they could quite comfortably in previous generations.
But this is where the situation becomes problematic.
What happens to those ALREADY living in the outer ring – the lower income earners? What happens to them???
Obviously they still need to live somewhere, and with the middle income earners being squeezed outwards, this is the part of the market where there REALLY is a housing crisis.
SQM Research’s vacancy rates reveal that the problem nation wide is most acute in Sydney’s west and south west.
This is where there is a serious issue and a genuine problem.
What is required is some tough decisions which will not please everybody. These decisions involve increasing the supply of multi unit dwellings in the inner, middle and outer rings, for most capital cities where there is a supply issue.
This does mean that certain localities will need to make their own sacrifices for the greater good, in terms of allowing (or forcing) council approval in relation to building in their local areas.
But sadly in Sydney, where in our opinion the crisis is most serious, this is not likely to happen in the forseeable future, because those existing property owners and land lords are extremely reluctant to allow an increase of supply of properties in their local area.
Source: SQM Research
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