Australia’s Housing Crisis: First Home Buyers Struggle, Renters Feeling the Heat

In the throes of an escalating housing affordability crisis, young Australians are grappling with an alarming challenge: purchasing their first homes. A study revealed that a mere 10% of potential first home buyers can afford to purchase a property after years of escalating real estate prices, leaving most young Australians locked out of the housing market.

The research, conducted by the Australian Housing and Urban Research Institute (AHURI), attributes one-third of house price inflation from 1994 to 2017 to falling interest rates. The remaining two-thirds have been driven by a lack of housing supply, population growth, and stagnant wage growth.

Rachel Ong ViforJ, Lead Researcher and Curtin University Professor in the School of Accounting, Economics, and Finance, explained the gravity of the situation: “Those who have much higher incomes, those who tend to come from wealthier families, and of course, they tend to be in full-time jobs, but they would basically be people who have higher socioeconomic status.”

ViforJ further commented on the persistent crisis, stating, “We know successive governments have tried to implement assistance schemes, but that has not been particularly helpful because if they were, we wouldn’t have these statistics that we have found.”

Meanwhile, renters aren’t faring any better. The rising cost of living is exerting more pressure on renters than homeowners, according to an analysis by CommBank IQ. Wade Tubman, CommBank iQ Head of Innovation and Analytics, indicated that despite the increased financial burden on some mortgage holders, nearly half of homeowners are mortgage-free, with a third having savings buffers of two or more years.

Hayden Groves, President of the Real Estate Industry of Australia, noted that “it is fair to say rental conditions are now the tightest on record.” This is backed by reports showing rental prices for houses and units surged 6% and 9%, respectively, over the past year.

The current housing and rental crises underscore the urgent need for effective interventions from government and policymakers. AHURI Managing Director Michael Fotheringham stated, “The rapid escalation of house prices is having a long-term effect, and it will take a long time for wages to catch up.”

REA Group Chief Customer Officer Kul Singh echoed these sentiments, advocating for a quick boost in housing supply to meet escalating demand. He stated, “The fastest way to increase supply would be to mobilise ‘mum and dad’ investors who have demonstrated their willingness to provide rental stock to the one in three Australians that rent.”

The crisis provides a stark reminder that as housing prices spiral and rental conditions tighten, a multi-faceted approach involving government, the private sector, and individual investors is necessary to alleviate the pressures felt by those most affected.

References:

Razaghi, T. (2023). ‘Ongoing crisis’: Alarming share of young people can’t afford to save for a house. https://www.smh.com.au/property/news/ongoing-crisis-alarming-share-of-young-people-can-t-afford-to-save-for-a-house-20230517-p5d948.html 

Australian Property Journal. (2023). Renters hurting the most, says CommBank. https://www.australianpropertyjournal.com.au/2023/05/17/renters-hurting-the-most-says-commbank/