Australian Housing Affordability Crisis Deepens, Leaving Many Disheartened
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Australia’s housing market continues to strain under mounting affordability challenges, driving a significant gap between home prices and what average earners can borrow, according to experts and recent analyses.
Elizabeth Redman’s article in “The Australian” highlights a bleak outlook for the average Australian household’s dream of homeownership. With recent economic conditions and consecutive interest rate hikes, the typical borrowing capacity has been sharply reduced. “We effectively capitalized zero interest rates into house prices during the boom over 2021,” said Jarden chief economist Carlos Cacho. “Since then, borrowing power has gone back by roughly 30 percent, a little bit more or less depending on the household.”
The scenario is particularly dire in Sydney, where owning a median-priced home now requires being in the top 40% of income earners. Meanwhile, in other capital cities, only the budget of those working full-time and saving significant deposits would stretch to own a home, leaving behind single workers and those without access to substantial family support.
The disparity in housing affordability has sparked calls for regulatory adjustments to support long-term tenants and adapt to a landscape where many may never own a home. Demographer Simon Kuestenmacher expressed the public’s frustration, noting that “People feel cheated out of the absolute basics of life… you can’t outsave the house price growth, so, ‘screw it, let’s not even try’.”
Despite the gloomy outlook, some experts suggest shifts toward taxing wealth rather than income or consumption could offer a solution. This potential policy shift, aiming to ease the burden on average earners, aligns with a broader need for regulatory reform to accommodate an increasing number of long-term renters.
Shane Oliver, AMP’s chief economist, pointed to another layer of the crisis: the building sector’s struggles. “More housing construction is needed to increase the supply of homes; normally high prices signal to builders to supply more, but more recently building costs have risen. Builders have been going bust,” Oliver explained. This compounds the issue, as reduced construction activity further limits housing availability, exacerbating the affordability crisis.
In sum, the dream of homeownership in Australia is increasingly out of reach for many, necessitating a multifaceted approach to policy reform and economic adjustment to restore balance to the housing market.
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