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 adjusting to the impacts of recent interest rate hikes, while 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 the government are under pressure to sort the mess out. However, 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?
Before we look at the now, let’s explore the overall trends of the recent past to explain how we got here. The last 30 years have seen their fair share of ups and downs in the property market, with cycles of growth and decline.
From 1991 to 2021, the property market in Australia showed significant capital growth — a striking 381.2%. Houses increased in value by 414.6%, while units went up by 293.1%—with COVID making an impact at the tail end.
The pandemic's arrival in 2020 initially cooled the market, sparking concerns about the economy and job security. The government stepped in with stimulus packages, grants for first-time homebuyers, and mortgage repayment deferrals. The Reserve Bank of Australia also played its part by cutting interest rates.
This support spurred a surge in property prices. Between 2020 and 2023, the median dwelling price rocketed from $678,500 to $925,400 — a 36.4% increase. The total value of residential real estate also ballooned from $7.2 trillion to $10.3 trillion. Though this initially encouraged a rise in first-time buyers, the rapidly increasing prices soon posed new challenges, especially for renters.
Let’s take a closer look at the rental market. Since the pandemic, rent values have skyrocketed, averaging an annual increase of 9.1% — a stark contrast to the modest 2.0% growth in the 2010s. This spike stems from changes in household sizes, population growth, and shifts in housing investment.
As rent values climbed, rental affordability deteriorated significantly. The proportion of median household income needed to cover rent has risen from 26.7% in March 2020 to 31.0% in September 2023. As a result of escalating rent values, a growing number of households are now falling into what the Australian Parliament House defines as 'housing stress'—a situation where more than 30% of a household's gross income is spent on housing costs.
Though rent values have recently increased, a slowdown is on the horizon, influenced by factors like investment lending, potential rate adjustments and migration trends. But for now, the quest for affordable housing remains a significant hurdle for many.
As we navigate through 2024, the broader housing market presents a complex picture. Property prices are still higher than pre-pandemic levels, exacerbated by the rising cost of living, making it tougher for first-home buyers — 89% of whom are unable to break into the market due to an inability to overcome both down-payment and repayment constraints.
In tandem, the rental sector, as we’ve just seen, is also under strain. High-interest rates and a mismatch in housing supply have pushed rental costs up, adding to the affordability crisis. This is especially acute in areas with severe housing shortages, intensifying the competition for both buying and renting homes. Amidst this, it's crucial to consider the broader implications of housing supply dynamics. The contrast between the population, increasing by over 620,000 in just a year, and the completion of 174,000 homes in the same timeframe, paints a stark picture of our housing challenge. Importantly, this challenge is deepened when considering that 25% of these home completions aren't new properties but actually knockdown-rebuilds, further diluting the perceived increase in supply.
So, what's the solution?
To effectively address our housing crisis, we need a dual approach: increasing the construction of homes in high-demand areas and bolstering the workforce capable of building them. A critical component of this strategy is to significantly expand our pool of skilled construction workers, which includes welcoming more skilled migrants into the sector. By doing so, we can ensure our construction capacity grows alongside housing demand, facilitating a smoother path toward resolving the supply challenges.
The Australian government recognises the housing challenge and is acting on it.
The Housing Australia Future Fund (HAFF) has $10 billion to support the construction of 40,000 social and affordable homes over five years, in accordance with the National Housing Accord.
The Social Housing Accelerator program, with its $2 billion funding, aims to quicken social housing construction. For example, Queensland is set to build 600 homes by 2025, using over $398 million from this program.
Expanding its efforts, the government aims to build 1.2 million new homes, supported by the National Planning Reform Blueprint. Additionally, a New Homes Bonus of $3 billion and a $500 million Housing Support Program are in place to help reach these targets. These initiatives collectively address the housing shortage and aim to increase affordable housing availability.
If you’re being hard hit by the 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 acknowledge there are no quick fixes:
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.