Australian Housing Market Challenges Persist Amid New Forecasts

Recent reports have highlighted ongoing challenges in the Australian housing market as the nation faces a shortfall in affordable homes, skyrocketing rental prices, and high demand for properties. As of April, the National Housing Finance and Investment Corporation predicts that the housing shortage could reach 175,000 homes by 2027, affecting approximately 450,000 people. Meanwhile, ANZ economists Felicity Emmett and Adelaide Timbrell have warned that home prices are unlikely to continue falling and might start climbing again by early next year.

Despite these issues, Westpac has recently predicted a “stabilisation” in the property market and expects house prices to rise by 5% in 2024. Westpac’s chief economist, Bill Evans, and senior economist Matthew Hassan, have explained that Australia’s housing correction is “largely over” and a combination of factors, including strong migration and increased construction costs, have led to this stabilization. However, Evans warned that if the Reserve Bank cannot tame inflation, rate rises could continue in 2024, potentially undermining housing market improvements.

In response to these market challenges, the Australian government has plans for a housing accord aimed at constructing one million homes by the end of the decade. Housing Minister Julie Collins is also pushing for the establishment of a $10 billion Housing Australia Future Fund, with the returns being used to help build 30,000 social and affordable homes within its first five years. However, the Greens have been demanding greater investment in housing, calling for a two-year rent freeze and $5 billion per year in social housing.

Critics argue that multiple factors have contributed to the current housing crisis, including local council planning regulations, population growth, and a tax system that has continually failed to support the construction of rental properties. Independent economist Nicki Hutley emphasizes that the current situation is unsustainable, stating, “The definition of stupidity is to keep doing the same thing over and over again expecting different results”.

References:

Wright, S., & Clun, R. (2023, April). Stop digging: Australia’s housing policies are in a deepening hole. The Sydney Morning Herald. https://www.smh.com.au/politics/federal/stop-digging-australia-s-housing-policies-are-in-a-deepening-hole-20230427-p5a8os.html 

Sharples, S. (2023, April). Westpac predicts house prices will rise by 5 per cent in 2024. The Sydney Morning Herald. https://www.smh.com.au/business/banking-and-finance/westpac-predicts-house-prices-will-rise-by-5-per-cent-in-2024-20230428-p5a9ok.html