Australian Housing Market Crisis: Wages Fail to Keep Pace with Skyrocketing Property Prices - Property Inc

Australian Housing Market Crisis: Wages Fail to Keep Pace with Skyrocketing Property Prices

As Australia grapples with an escalating housing affordability crisis, experts warn that the widening gap between wages and property prices is pushing the dream of homeownership increasingly out of reach for many Australians. Elizabeth Redman in her article for The Domain highlights the stark reality: over the past 12 years, capital city home prices have surged by 93.5%, while wages have risen a mere 34.7%.

The disparity is driven by a potent mix of factors. Gareth Aird, the head of Australian economics at Commonwealth Bank, points to historically low interest rates that have recently started to rise, robust population growth, and inadequate housing supply as key drivers behind the soaring property prices. “Affordability for a median dwelling is as bad as it’s ever been in several of the major capital cities,” Aird stated, emphasizing the difficulty new buyers face in entering the market without substantial parental support or taking on significant debt.

Diaswati Mardiasmo, PRD Real Estate’s chief economist, also sheds light on the challenges stemming from a slowdown in new house construction. “Even before COVID, there was a decline in the amount of houses being approved for development,” Mardiasmo explained, highlighting the increasing costs and limited availability of land for new homes, particularly in inner cities and capital areas. This has led many prospective homeowners to adjust their expectations, considering apartments over houses as seen in many international cities.

The financial strain on buyers is further compounded by the necessity of larger deposits and the use of a higher proportion of their income to service loans. Theo Chambers, CEO of Shore Financial, observes a significant shift in buyer behavior over the past five years, noting, “Especially during that low rate environment, we saw a lot of people get rid of their car lease and cut up credit cards… and put that capacity into buying homes.”

However, despite some attempts to manage finances more strictly, the reality remains grim. “Today there’s people on reasonably decent salaries that are struggling to get into the property market, let alone buy the median dwelling,” Aird laments. He suggests that without significant policy interventions aimed at increasing new home construction or curbing investor demand, the gap between wages and home prices is unlikely to close.

As this trajectory continues, the dream of homeownership may remain elusive for many Australians, signaling a need for urgent and comprehensive policy solutions to address the growing divide.

References:

https://www.smh.com.au/property/news/as-bad-as-it-s-ever-been-property-prices-blow-out-and-pay-rises-lag-20240516-p5je4y.html 

Recommend0 recommendationsPublished in Property News

Related Articles

Responses