A new report offers solutions to housing affordability concerns

author-avatar By on September 30, 2021
A new report offers solutions to housing affordability concerns

As the housing boom continues to weigh on the Australian property market, a new report says that without intervention, affordability is 'likely' to worsen.

A new report by the Grattan Institute has addressed the ongoing issue of housing affordability, citing contributing factors and offering solutions to be implemented by the government to combat rising house prices.

Falling home ownership rates, particularly among young and poorer Australians, is highlighted in the report.

It also states that without interference, many more young people will be 'locked out' of the housing market.

Despite record low interest rates and rising house prices, the report says that housing costs would have risen less if more homes had been built.

It reveals that if an extra 50,000 properties are built each year for 10 years, the cost to buy and to rent could be 20% lower than they would be otherwise. 

"Increasing housing supply will only restore housing affordability slowly," the report says.

"But without a concerted effort to boost housing supply in Australia, housing affordability will likely get worse."

Grattan's report also says that Australia has among the least housing stock per adult in the developed world.

The report outlines the issue of supply and demand, pointing towards a lack of new housing being built to meet the needs of the growing Australian population.

The report also referenced reforming tax, welfare policies, and reduced demand as ways to improve housing affordability.

"It should reduce the capital gains tax discount from 50% to 25% abolish negative gearing; and include owner-occupied housing in the Age Pension assets test," the report said.

Halted migration added upward pressure on house prices

A recent housing outlook report by insurer QBE highlights a key theme for shifts in the housing market: the 'abrupt' changes to domestic and international migration.

The typical influx of migrants and outflow of Australians isn't at its 'usual' levels, as new arrivals have fallen from 250,000 each year to less than 72,000 - this has had a significant impact on the housing market according to the report.

Returning citizens and the number of new permanent residents, however, have rebounded 'substantially', which is adding a new source of demand to the property market.

Additionally, domestic migration patterns shifted - inflows from regional areas are back to normal, but outflows to regional areas are well above pre-pandemic levels.

"The ability to work from home, coupled with affordable housing opportunities outside of city centres and a preference for space, are partly responsible for the upturn," the report said.

The report also highlighted factors at play that caused the sharp increase in house prices: government support; savings accumulated during lockdowns; historically low interest rates; and a desire for more space as people work from home.

New approved dwellings rose 6.8% in August

The Australian Bureau of Statistics (ABS) released its seasonally adjusted estimate for total new dwellings approved for August which is up by 6.8%.

This makes up the 3.5% rise in private sector houses, and 13.7% increase in private sector units.

This increase is following the 8.6% decrease in new approvals in July, with Western Australia leading the surge with a 21% increase in total dwellings approved.

Total dwellings approved also rose in South Australia (11.8%); Victoria (10.5%); and Queensland (4%).

However, approved dwellings dropped in Tasmania by 18.9%, and in New South Wales by 2.3%.


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Image by Blake Wheeler on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
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  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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Rachel is a Finance Journalist, and joined Savings in 2021. Coming from a background in the FinTech space, her interests include the innovation of lending technology, property, investing, and more. With a passion for educating and informing people about their finances, she hopes to increase the financial literacy of everyday Australians.

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