Home affordability continues to be a major talking point.
Recent Government benefit changes to first home buyers have helped those buyers. But really that is treating the symptom not the problem.
Basic economics outlines the simple rules of demand and supply that we are all familiar with: Where demand exceeds supply, prices rise.
We do not have enough housing where people want to live. And new build is not matching increasing demand for housing, so the problem is getting worse.
In Victoria there has been a well-publicised ‘anti-landlord’ raft of taxation and legislation changes recently, successfully driving landlords from the market. That has contributed to Victorian housing prices underperforming the rest of the nation over the last 5 years, as graphically illustrated in our June newsletter.
That has, in the short term, aided affordability for home buyers. However, it has also caused a shortfall in available rental accommodation for those requiring rental properties, which has been driving up rental prices.
Recent reports indicate a reduction in Victoria of homes available for rent of 17,000 properties (despite massive population increases). The effect of that is not just on pushing up rents, it has also caused an increase in occupancy. For example, more two-bedroom apartments now have 2 couples renting; a three-bedroom house may have 6 people resident.
To fix the affordability problem we need more houses built. Yet despite this accepted fact, we see shortages in titled land and builders struggling to be successful in business. It is pertinent to note that in Sydney approximately 50% of the total cost for a new house-and-land package consists of taxes and regulatory fees. In Melbourne those costs are around 43%. Building property is not an easy game.
This commentary is not intended to come up with magic solution ideas – I am more interested in highlighting to readers that despite continual headlines about the housing affordability crisis, there is no end in sight to continued increases in housing prices.
Too many commentaries appear based in politics or “generational divides”. There is no doubt our younger generations are more reliant than ever on parents to assist in being able to purchase, however the underlying cause of that is the lack of supply and the cost of construction. With no solution insight.
It’s a jungle out there, sometimes, I wonder how we keep from going under. (With apologies to Grandmaster Flash).
What we can help with is your lending issues, and for those wanting to construct, we have been working with expert advisers in that field, assisting our clients avoid construction disasters.