Analyzing Australia’s Housing Dilemma: A Comparative Perspective - Property Inc

Analyzing Australia’s Housing Dilemma: A Comparative Perspective

Australia’s housing market is trailing behind its international peers, with a glaring discrepancy in housing supply compared to other OECD countries. This issue has been highlighted in a detailed analysis by Jemimah Clegg, who explores the multifaceted challenges facing the Australian housing sector.

According to recent federal budget documents, Australia ranks 22nd out of 33 OECD countries in terms of housing provision. This underperformance is contributing significantly to escalating rents, mortgage repayments, and overall house prices. From 2011 to 2022, Australia’s housing stock increased marginally from 403 dwellings per 1000 people to 420, yet this growth fails to match the pace set by other nations or the OECD average.

Economics professor Rachel Ong ViforJ from Curtin University points out the need to consider demographic factors when comparing international housing supplies. She explains that “Australia had an average of 2.5 people per dwelling… [while] the number one country for supply, Italy, had about 600 dwellings per 1000 people, but that only equated to 1.7 people per household.” Ong ViforJ emphasizes the unique characteristics of Australian demographics, including larger households and more substantial home sizes, which differentiate it from countries like Italy.

However, she stresses that simply increasing the new housing stock isn’t a swift solution to the affordability crisis. “New housing supply only adds to the existing housing stock a bit at a time, so it will take a long time for new housing supply to have any positive impact on affordability,” Ong ViforJ mentions. She advocates for more efficient utilization of existing homes and suggests incentives for downsizing, alongside addressing the impacts of short-term rental platforms like Airbnb on long-term rental availability.

Comparatively, Saul Eslake, another economist, notes that despite Australia’s similar demographic makeup to Canada, the latter has managed to increase its housing supply more effectively. “It’s helpful to compare with others as one way of working out how we’re doing and to ask, ‘Could we be doing any better?’” Eslake states, highlighting the comparative analysis as a tool for improvement.

Paul Bloxham, HSBC’s chief economist, attributes the shortfall in dwelling numbers per capita in Australia to the preference for detached, suburban houses rather than urban apartments. “For any given amount of demand for the housing in those [major Australian] cities, we’ve got less supply of well-positioned housing because we have a preference for having detached dwellings laid out in suburbs,” Bloxham explains. He suggests that increasing the construction of apartment buildings could help alleviate some of the affordability issues by providing more housing options near major cities.

Eslake also touches on the generational aspirations impacting the market, noting that while younger Australians are more open to living in apartments, they do not want to compromise on location. He proposes tax reforms, such as adjusting stamp duty, to make downsizing more attractive for retirees, potentially freeing up more homes for younger generations.

The insights from Clegg’s article, combined with expert opinions, underline a complex web of demographic, cultural, and economic factors that shape Australia’s housing market. Addressing these issues requires a multifaceted approach that considers both supply enhancements and better utilization of existing housing stock, along with significant policy reforms to ensure a more equitable and sustainable housing future for Australians.

References:

https://www.brisbanetimes.com.au/property/news/why-the-australian-housing-market-is-worse-than-our-overseas-peers-20240603-p5jiyg.html 

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