Government rides in to rescue Sydney home buyers and tenants from growing affordability blues

As Sydney’s already congested property market continues to tighten with the city’s expanding population, the state government steps in to address what is fast becoming a critical housing shortage.

Housing affordability took a nose dive in 2010 for the Harbour City, with prices soaring by 20 per cent within the space of 18 months and seven consecutive interest rate rises adding to home buyers’ woes. But in spite of this, demand continues to intensify as Sydney’s housing market moves onwards and upwards while other capital city markets flat line. 

According to a report in the Sydney Morning Herald, the NSW government has recognised the need for urgent action to alleviate mounting pressure on the state’s housing supply. Competition for rental accommodation is driving up rents and enticing buyers back into the market as indicated by recent weekend auction clearance rates.

Policies designed to increase the supply of new housing in Sydney include a stamp duty benefit for first-home buyers for new houses only, cutting the age limit for the Home Builders Bonus and releasing 10,000 new housing allotments in outer Sydney.

But experts say more needs to be done in order to increase the density of Sydney’s urban profile, including an increase in medium and high-density construction and a more rapid regeneration of inner-urban brownfield sites into affordable residential accommodation.

One of the biggest stumbling blocks for Sydney developers has been the snail paced approval process for new projects as evidenced by the fact that last financial year 24,206 new houses were approved in Melbourne, compared with just 8298 in Sydney according to the Australian Bureau of Statistics.

With the population of both cities set to rise significantly in the next ten to twenty years, the obvious concern is that if construction activity for residential dwellings doesn’t pick up in Sydney soon, housing affordability will become an even bigger issue for locals.

Quite simply, the cost of Sydney housing is higher than in Melbourne because of a growing supply and demand imbalance that needs a quick fix.

Whether the recent push by the NSW government to address the housing shortage in Sydney will be enough to alleviate current stock pressures, only time will tell. And more importantly, is it all too little too late to prevent affordability from getting completely out of hand?

Of course for investors in the Sydney market, this is all very good news as it means both house prices and rents in the NSW capital will continue to perform strongly into the future. Certainly a sound investment.


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit

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