Anytime you turn on the TV in Australia or pick up a newspaper, you are faced with news of the property affordability crisis that is impacting Australian home buyers. There isn’t a day that goes by without the media highlighting that housing affordability for Australians is hitting, and it’s hitting hard. Editorials and opinion pieces fill newspapers calling out for something to be done, stricter controls need to be placed on investors, international buyers are taking over the market. The inconvenient truth to all this noise? There actually isn’t a housing affordability crisis in Australia.
Out of Control Markets
One of the key elements of the continued insistence to the problem facing the Australian housing market is the cost of property in Sydney and Melbourne. It is true that property values in these cities have experienced unprecedented growth, with a 75 per cent increase in the average mean price for property in Sydney and 55 per cent in Melbourne over the past five years. However, this growth is not seen anywhere else around the country. The other states are only seeing growth rates of 3-5 per cent after inflation. The growth rate in Sydney is also compounded by constricted supply, with the rate of new property builds lagging, creating a very real, but localised issue with property affordability and accessibility.
It’s a Localized Issue
The largest section of the Australian population lives in Sydney and NSW, coming in at 29 per cent. The perception that what is happening in Sydney is spread across the rest of the Australian market is creating a bigger problem across the nation. Government policy is being largely driven by reports coming from the localised problem in Sydney. The impact of this type of policy reform is that the rest of Australia is suffering under introduced restrictions, creating a credit crunch. By taking a uniform national approach to markets that operate very differently across cities and states, it is creating a problem for these markets to grow and bring in new borrowers. The factors that are negatively impacting the Sydney market are not the same for the markets in Adelaide and Perth.
Are There Too Many Investors?
Another false element driving perception of a property accessibility and affordability crisis is that investors, both local and international, are pushing first home buyers out of the market. With recent legislative changes moving through the property market, international investors needing to borrow funds have been practically removed from the Australian property market. On average, local investors that can secure financial approval, only make up 30 per cent of the buyers within the property market. With such a small section of buyers being investors, the assumption that they are controlling the market is, quite frankly, false.
What Is the Answer?
For housing to remain accessible and affordable, the Australian Government and lending institutions need to consider varying policies at a state or regional level. Many lenders already impose post code restrictions on lending policy, which could easily be extended. This will allow greater control over markets and avoid issues with affordability that are happening in markets like Sydney and Melbourne, while simultaneously providing support to markets in Adelaide and Perth to allow these to grow and not be negatively affected by already out-of-control markets in other states. Adopting a one-size-fits-all national approach to restricting the financing of housing markets in Australia is leaving everyone, from first home buyers to investors, in a far worse state.