Australia’s housing affordability crisis

| March 19, 2013

Property Expert and Managing Director of Buyer Solutions, Janet Spencer, reflects on Australia’s ever-changing real-estate market and shares her thoughts on what the future holds for prospective home-buyers.

Some of you will recall a time in Australia when newly married couples in their early 20’s were able to purchase their first two or three bedroom home relatively close to a major city, manage to pay it off within 10-15 years and then extend or upgrade to meet the demands of their growing family.

Today in Australia, the landscape has changed:

  •          There are a greater number of single person households.
  •          The definition of ‘family’ has changed and expanded.
  •          Various government grants and stamp duty concession schemes have the ability to adjust the market.
  •         The opportunity for low income earners to purchase their first property has decreased.
  •          As rents continue to rise, more low income earners are forced to share with other friends or family members.
  •          The amount of rent assistance provided by Centrelink has not kept up with rising rental costs.
  •          Between 1991 and 2011, house prices increased by 263 per cent, while net income grew by only 95 per cent.
  •          The average loan to property value ratio has increased and is now around 85 per cent.
  •          Lower interest rates mean there has been a change in affordability for higher-priced properties.
  •          There has been an increase in property price to income ratio, and in most areas of Australia property prices still follow recurring cycles.
  •          Foreign investment continues to change the landscape of certain communities (particularly in regional areas).
  •          There is a greater range of accommodation options.
As a licensed real-estate agent servicing both buyers and sellers, I believe that there are a number of issues that need to be faced.
Everyday Australians and policy-makers need to review, consider and plan for the following:
  • Older single person householders living in large homes on traditional land sizes who are unable to complete maintenance, trapped in an increasingly isolated social environment, disconnected from their local community, and often without access to convenient public transport.
  • First home buyers face a disparity between the stamp duty savings calculation value of $600,000 and the first home-owners grant of $750,000 (these should be equal).
  • The proliferation of advisors in the real estate market place who are not qualified or registered to provide real estate advice, particularly in the rent-to-buy category, placing uneducated buyers in financial risk.
  • The potential for outer-suburban areas to become future ghettos if they do not receive access to quality public transportation.
  • National policies and procedures for the real estate industry are required to avoid duplication and ensure the national interest is maintained.
I also believe that policy-makers have been prudent to:
  • Continue to enforce strict credit standards for mortgage finance,
  • Move towards a planning environment that incorporates energy efficiency and sustainability,
  •  And provide a greater range of free checklists and tools for consumers.
I welcome further dialogue and input from Open Forum readers.
A range of information on these topics is available through National Shelter, Australia’s peak housing advocacy organisation; Australians for Affordable Housing, a coalition of national housing, welfare and community sector organisations; and MoneySmart by ASIC, which has a dedicated section on buying a home.
Janet Spencer is the Founder and Managing Director of Buyer Solutions established in 2001. She is an independent property buyer, advisor and vendor advocate helping people to buy, sell or invest in real estate. Janet is a representative on the Real Estate Institute of Victoria (REIV)’s Member Council and the Chairperson of the Buyer’s Agent Chapter. She is also a member of the Real Estate Buyers Agent Association (REBAA) of Australia. Janet provides commentary for a range of real estate publications and is regular feature writer for various publications.