“Australia’s private rental crisis looks set to deteriorate further,” the Housing Industry Association warned in media release on Monday.
“It’s not just renters who will feel the heat as the reliance on government funded private rental assistance also looks set to skyrocket with the REIA reporting rent increases over the past 12 months as high as 9.8 per cent,” the HIA’s amusingly named director of housing and economics Simon Tennent warns.
“The value of bond loans and ongoing rental subsidies is likely to become a bigger drain on government finances and sadly these measures hardly bridge the gap between long term renting and making the leap into home ownership.”
How will the issue play out in this election year? Our friends over at Henry Thornton have been warning of further interest rate rises for some time now. Others are joining them – and that ain’t good news for the Government.
A research paper on the topic prepared by Macquarie Banks calls housing affordability “one of the most-discussed features of our economy… a real ‘barbeque stopper’.”
The briefing warns:
With home prices having surged relative to wages pretty well everywhere in Australia over the past decade or so, the main affordability problem for would-be homebuyers – both ‘entry level’ and those hoping to ‘trade up’ – is that they cannot afford to buy a family home with a decent yard anywhere near where they would like to live. More than ever before, would-be homebuyers on average earnings or better have been ‘priced out’ of the market for well-located family homes.
The sustained surge in home prices that delivered massive windfalls (on paper at least) to existing homeowners worked to crush the prospects of aspiring first-home buyers. The downsizing of ‘The Great Australian Dream’ for them has involved some combination of:
(i) living with parents and/or remaining renters for longer (forever?);
(ii) downgrading in terms of location and/or yard size; and
(iii) taking out bigger mortgages that stay big (as a multiple of income) for longer periods – and so running greater financial risks – than was typical in earlier decades.
The Government and opposition are going to have to do more than promise to keep interest rates low. The rental market too seems set to be a hot election issue.