Australia Housing Market: A Complex Interplay of Shared Equity Schemes and Falling Housing Stocks

In Australia’s increasingly complex and expensive property market, diverse strategies are being tested to provide relief. While some families find hope in shared equity schemes, others are confronting the reality of plummeting housing stocks. Experts believe a multifaceted approach will be necessary to address these ongoing challenges.

Recent reports indicate an increasing popularity of shared equity schemes among Australians struggling to break into the housing market. As Jordan Beazley of The Guardian explains, these programs allow individuals or couples to purchase a portion of a home, with the remaining portion owned by a government entity or non-profit. Homeowners can then choose to buy out the other half at any time.

According to Tim Buskens, CEO of Hope Housing, shared equity schemes are “institutionalising the bank of mum and dad for people that don’t have the bank of mum and dad” (Beazley, 2023). Such programs, backed by investors, assist people in affording a home with a smaller deposit, paying mortgage repayments only on their portion of the home.

However, this solution is not without its detractors. Joey Moloney of the Grattan Institute cautions that while these schemes can indeed aid people without access to parental wealth, they are just one tool “in the housing toolbox”. If overused, they risk further inflating house prices. Moloney advises limiting eligibility for the scheme to singles earning up to $60,000 and couples earning up to $90,000 who would otherwise be shut out of the housing market.

Meanwhile, Tarric Brooker in the Sydney Morning Herald warns of a looming disaster in the Australian housing market due to plummeting stocks. Unlike the synchronised boom witnessed in 2020 and 2021, housing prices across the country have diverged significantly since the Reserve Bank of Australia (RBA) began raising interest rates in May of last year.

Brooker reports that in the current climate, seven out of eight capital cities have lower housing stock than in 2019. He raises the question: “can new listing volumes go even lower and how long can new listings be postponed?” According to his analysis, weak listing volumes play a major role in supporting the housing market. However, he also points out that this trend cannot continue indefinitely, suggesting uncertainty in the future path of interest rates, the duration of the rental crisis, and concerns over how the Australian economy will weather a global slowdown.

It seems that the solution to Australia’s housing crisis will not be found in a single policy or economic trend. As Saul Eslake, an independent economist, stated in Beazley’s article, schemes such as shared equity are a “Band-Aid” that can assist individuals but do not provide an overall solution to deeper problems in the housing market. It seems clear that addressing Australia’s housing crisis will require a nuanced, multifaceted approach, combining innovative solutions like shared equity schemes with strategies to increase housing stocks and support economic stability.

References:

Beazley, J. Going halves: are shared equity schemes the answer in Australia’s pricey property market? https://www.theguardian.com/australia-news/2023/may/14/going-halves-are-shared-equity-schemes-the-answer-in-australias-pricey-property-market

Brooker, T. Disaster looming in Aussie housing market as stocks plummet. https://www.news.com.au/finance/real-estate/buying/disaster-looming-in-aussie-housing-market-as-stocks-plummet/news-story/e22cca7f303472f852765f71787089d2