What’s causing the housing affordability crisis?
Housing affordability has been making headlines across the nation; especially in Sydney where it’s becoming increasingly difficult to find property under one million dollars. In fact, the newly released annual Demographia report on housing affordability found that Australia has some of the least affordable housing markets in the world. Sydney was ranked as the second least-affordable housing market behind Hong Kong, with Melbourne coming in at equal fourth.
So what’s actually causing the crisis? We take a look at a couple of the factors contributing to the increase in property prices.
Limited Supply
The Prime Minister, Malcolm Turnbull, has blamed limited land supply and stock for fuelling Sydney’s high housing prices. Mr Turnbull has accused NSW councils of taking too long to approve development applications – three times as long compared to their counterparts in Brisbane – which contributes to supply problems.
ParkTrent CEO Ron Cross believes population is the main cause and supply is not a significant contributing factor.
“Supply is already at a very high level,” Mr Cross said. “I believe prices will continue to rise due to our massive population growth.”
Population Growth
Based on the estimated resident population at 30 June 2016, and assuming growth, the resident population of Australia is projected to be 24,375,247 as at 28 February 2017.
The population of Australia has grown by 25 per cent since the Sydney Olympics in the Year 2000 – more than the entire population of Sydney at that time. Mr Cross feels this is because the games showcased what a wonderful country Australia is.
“The Sydney Olympics showcased Australia to the rest of the world, as what we all know it to be, a wonderful, safe, friendly country to live in and raise a family,” Mr Cross said.
In the last decade, Australia’s population growth has increased slightly above historic trends, largely due to migration. In fact, more immigrants came to Australia since 2000 than arrived between 1950 and 1980.
Based on current trends, the Australian Bureau of Statistics projects the population of Australia will grow to around 40 million by 2061. Depending on migration policies, this figure could grow to between 42 million and 70 million by 2101.
So how do we solve the issue of housing affordability?
The incoming NSW Premier, Gladys Berejiklian, has announced that improving housing affordability would be a priority for her government but is yet to discuss any plans. Many have called for changes to the negative gearing scheme however Mr Cross thinks this would simply create uncertainty in the market place.
“Whatever the changes are, if any, ParkTrent will be able to adjust and continue providing wonderful property investment opportunities for all Australians,” Mr Cross said.
Want to invest in property for under $500,000?
Contact us today to arrange a one-on-one property investment consultation.
Sources:
- Housing affordability: Inquiry that made no recommendations a ‘waste of money’, Labor says – ABC News
- A housing affordability crisis in regional Australia? Yes, and here’s why – Domain
- Housing affordability: ‘Red tape’ to blame for property crisis – news.com.au
- Population Clock – Australian Bureau of Statistics
- Population growth in Australia – Report by The Australian Institute