The property market continues to be a hot and contentious topic.
House prices, the rising cost of living and a shortage in supply are dominating headlines. Whether you’re a homeowner, renter or policymaker, the pressure is on.
Homeowners are dealing with continued interest rate hikes. At the same time, those looking to get on the property ladder either can’t find a home or can’t afford a mortgage. Meanwhile, renters are unable to find secure and affordable housing among stiff competition and struggling with increasing rents.
Policymakers and government are under pressure to sort the mess out. But so far, their efforts appear to be falling short.
So, what exactly is going on? And how do we ride out this storm that is Australia’s housing crisis?
A Brief (Recent) History of the Aussie Housing Market
Before we look at the now, let’s explore the overall trends of the recent past to explain how we got here.
Over the past 30 years, we’ve seen more than a half dozen periods of sustained increases in value and about the same number of periods of decline. The property market always ebbs and flows in cycles.
Between 1991 and 2021, the Australian property market delivered overall capital growth of 381.2%. During this time, Australian house values increased 414.6%, while units saw 293.1% growth—with COVID making an impact at the tail end.
Pandemic brings the calm then the storm
When the pandemic hit in 2019, the market initially experienced a notable slowdown and price decline due to the uncertainty surrounding the economy and job security.
To mitigate this, the government introduced various measures to support it, such as stimulus packages, grants for first-time homebuyers, and mortgage repayment deferral programs. The Reserve Bank of Australia (RBA) also made significant cuts to interest rates to make borrowing more affordable.
As a result of this support, between April 2020 and February 2022, housing prices jumped 24.6 per cent. The total value of residential real estate soared from $7.2 trillion at the start of the pandemic to $9.8 trillion. And the median dwelling value increased by $173,805 to $728,034.
While early on, there was a rise in first-time home buyers, this quickly declined as prices accelerated. Renters also saw prices drop early in the pandemic. However, since March 2020, median advertised rents have increased by $30 per week to $470 weekly.
Due to rapid increases in house and rental prices, debt levels began to break records.
2022 sees rate rises and price declines
Moving into 2022, the Australian property market faced significant challenges as it experienced eight consecutive interest rate increases aimed at curbing high inflation.
These rate hikes profoundly impacted the market, contributing significantly to the decline in home prices across the country.
Over the course of the year until November, national housing values witnessed a notable decrease, falling by 3.2 per cent. However, from September onwards, this rate of decline slowed.
The Current State of the Market
Now, despite now 12 rate rises, the Australian property market is seeing prices rising, defying expectations. It looks like our property markets have bottomed out, and we’re moving towards the next cycle—though recovery won’t be quick.
But with property prices still higher than pre-pandemic and the rising cost of living, first-home buyers are finding it even harder to get on the property ladder. New research found that 90% of aspiring first-time buyers cannot purchase a property.
High-interest rates (and mortgages) also mean renters are still struggling with unaffordable rents. We also don’t have enough housing to cope with our rising population. This is putting renters in a battle for leases.
So, what’s the solution?
Significant interest rate drops will help, but they are still likely 18 months away. In the meantime, the best way to ensure affordable housing is to build more of it where people want to live.
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What’s the government doing?
The Australian government knows what needs to be done and is making attempts to tackle the issue.
One initiative is the Housing Australia Future Fund, designed to finance the construction of 30,000 new social housing and affordable dwellings over the next five years. However, this was stalled in the Senate and can’t now be introduced into Parliament until October.
In the meantime, they plan to give all states and territories a combined total of $2 billion to build more homes. But in the scheme of things, this is just a drop in the ocean and isn’t considered anywhere near enough to cope with demand.
There are also many ‘missing homes’—homes that started being built but halted due to the labour and materials shortages brought about by the pandemic.
Coping through the crisis
If you’re being hard hit by the 2023 Australian housing crisis, which is only being compounded by the rising cost of living, the outlook may look bleak.
However, while we can’t control the state of the market, we can take action against the housing crisis on a personal level.
Here are 9 recommendations though we appreciate there are no quick fixes:
- Create a smart budget and stick to it
- Explore what government help is available
- Look at additional sources of income
- Source strong rental references
- Understand your rights as a renter
- Work on improving your credit score
- Seek out motivated sellers and negotiate on price
- Stay informed on the housing market
- Seek professional advice on your situation
Let’s Ride This Storm Together
Many of us are feeling the pressure right now. But, whatever your situation, you’re not alone. There’s no shame in reaching out for help.
One of our social support partners, AskIzzy, is a free, anonymous website that can connect you with various services such as housing, meals, financial aid and counselling across Australia.
We can get through the storm together. And just remember, another calm will come.
If you’re struggling in the housing crisis storm, get in touch with our team of debt solution specialists today on 1800 534 534 for professional, non-judgmental support and advice.
