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Wednesday, May 22, 2024

Australian housing affordability reaches a decades-low point

There’s been an intriguing development brewing in Australia’s real estate market. As house prices soar to record-high levels, the lucrative allure of living close to the water is becoming all too common. Waterside properties have always carried a hefty price tag, but this trend goes beyond the luxury homes that boast perfect panoramas and beachfront access. It’s about the unsettling emergence of tents and makeshift shelters sprouting all along Australia’s coasts, speaking volumes about the worsening gap between housing costs and affordability.

But Australia isn’t alone in this issue. Around the world, soaring house prices are outpacing income growth, causing widespread concern. Even last year, when experts predicted a decline, house prices instead surged back with surprising vigor. And it’s not just buying; rental markets are just as sizzling. Vacancies are at an all-time low while rents continue to skyrocket. Surprisingly, in the past, the rising cost of housing was somewhat negated by lower borrowing rates. Now, even mortgage rates have climbed, making it increasingly challenging for would-be-homebuyers to qualify for financing.

So, why are housing prices showing such unexpected resilience? It’s not just global trends like remote work changing housing value perception. There are also a few domestic factors at play. For one, foreign demand for Australian housing has reached new heights, with record numbers of immigrants, international students, and overseas buyers flocking to Australia’s real estate market. At the same time, a 30% increase in construction material costs has resulted in a decreased supply of new homes, exacerbating the upward pressure on prices. Additionally, local councils’ strict planning regulations are further constraining housing development and causing prices to soar.

The Australian government, recognizing the magnitude of the issue, has announced several measures to alleviate the housing crisis, such as reducing immigration, increasing fees for foreign homebuyers, and imposing taxes on unoccupied properties. But the real solution lies in building more homes, and there’s a promising target to construct 1.2 million homes over the next five years.

Efforts are also being made to loosen planning restrictions and rewrite zoning rules to accommodate higher density housing. Despite the potential backlash from those who oppose such developments, it’s a necessary step to address the growing disparity in housing accessibility.

This situation presents a captivating storyline about the real estate landscape—what’s causing prices to surge, the impact on affordability, and the potential solutions.

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