The Housing Crunch in Australia

Challenges for Buyers, Sellers, and the Government

A Popular House with a Dark History

As an example of current property: Property inspection

Apparently, a hundred years ago, there were witches that lived here, but that hasn’t stopped it from being one of the most popular houses this year. There’s a huge hole as you walk in the front of the house, but we put a bit of plywood there, and we’re still recommending that people step over that if they can. Some of these houses are in such bad condition that we must get people to sign waivers to understand what they’re walking into. We’ve had over a thousand inquiries online, shown about 60 people through the home and sent out 30 contracts. With the market feedback, prices have been between 1.3 and 1.4 million, making it a great raw site for someone looking to renovate.

The Sydney Housing Market: A Bellwether of Property Prices

Alarms are going off in Sydney, known as Australia’s Bellwether Property Market. The coastal city ranks as the second least affordable housing market in the world among 94 major cities. This rush is very overwhelming; there’s not enough supply, and there’s too much demand

I’ve been selling in the area for the last 18 years. The Sydney Market is the strongest in Australia, and that has to do with the beaches and the accessibility to the City airports. It’s a fantastic location with a huge lifestyle scene, and I think it has the highest growing population out of all the Australian cities, and that’s always going to cause prices to go up. When land and homes are scarce, the toughest Market I’m finding for buyers is the low-income first-home buyers, who often look at one- or two-bedroom apartments. As you can imagine, when rates go up from two per cent to six per cent, that’s huge for someone on a single-income salary looking to buy their first home.

Ercan Ersan

The predicament is mirrored globally, from the UK to Singapore, with little to no signs of relief. So what’s driving this housing crunch, and what are the consequences for buyers, sellers, construction firms, and the government?

National home prices in Australia have risen 33% since the onset of the pandemic. At the same time, interest rates are markedly higher. Now, we’re seeing that because we’ve got very tight conditions with respect to the supply of stock on the market. We’ve also got the unemployment rate which is sitting around a multi-decade low, adding an additional sense of security for home buyers. So we’re continuing to see that housing demand has been bolstered by a strong rebound in net migration. The population of Greater Sydney is expected to grow by 1 million by 2041 to 6.1 million people. To cope with that influx, the state needs about 900,000 additional dwellings by then, according to government estimates. But the tight supply of homes for sale isn’t the only problem.

The Rental Market Crisis

Rental markets in Australia are incredibly challenged at the moment. We’ve got vacancy rates at or close to record lows in most Capital Cities Australia-wide. We’ve got a very strong demand for rent, which continues to outstrip the supply of available rentals. Less than one per cent of the country’s rental properties are available for occupancy, which is the lowest among comparable markets globally. The tight supply partly explains why house and apartment rent surged by 16% and 20% in the past year alone.

The Affordability Challenges for the Younger Generation

When we look at the affordability challenges that the housing market presents in Australia, we see that the younger generation of Australians are most impacted by these challenges, and also amongst those on lower income. 23-year-old Harry and his mother live on the outskirts of Sydney. Harry is a student with a part-time job with a two-hour commute each way. They’re bearing the brunt of the housing crisis, having been left with no choice but to move from house to house to house. Harry says, “The house we were put in previously, I think we started renting it for 470 or 500 a week. It rose to 550. We couldn’t keep up with the cost. My mum is a Catholic Primary School teacher. She’s lived in the area for 20-something plus years, and she can’t afford to live in the same area that she’s lived in.” Harry says they were evicted from their rental house in 2022 when they asked for repairs to the shower.

The Major Disruption of Your Life Housing Crunch

And then suddenly, they’ve just had to drop everything and spend all of their time looking for rental properties, just inspection after inspection, and applying for properties and not hearing anything back. One of the inspections they went to in a nearby suburb, they got there, and around 85 people counted. You don’t stand a chance when there are that many people going. It’s the same with the pitch. It’s kind of like, “Wow, you know, let me do a resume for my dog.”

The Challenges of Building More Homes

Hurdles remain for building more homes to ease the housing crunch. In the background, the construction collapses, with firms going bankrupt in the dozens. A pandemic-driven building boom is partly to blame. Construction firms had agreed to fix-price contracts with lockdown homeowners looking to fix up their properties. But then the cost of labor and building materials spiked along with inflation. According to the Builders Collective of Australia, houses are now 30% more expensive to build than before the pandemic. For some, any relief can’t come soon enough.

Incentivizing Social and Affordable Housing

One way to help alleviate the housing crunch in the Australian housing market is by incentivizing or increasing the supply of social and affordable housing for a portion of housing market participants that are so often overlooked and for whom it is crucial to be able to access stable and secure housing tenure. Across Australia, housing supply and housing affordability are a challenge. We are looking at opportunities to provide greater densification. We’re looking at providing more planning pathways for different types of housing typologies. Firstly, increasing the social housing stock.

“Where you live, it’s not just a roof over your head. It’s:-

• community,
• Where you build your family,
• Where you build your networks,
• How you get to know people,
• Your sense of self.

We’ve recently received 610 million dollars from the Commonwealth government that will be directly put into social housing. The government contributes to social housing in the hundreds of hundreds of millions each year to ensure that we reinvest in both new and improved social housing stock. At the moment, every single aspect of renting in this country is centred around profit. The home is such an indescribable thing, and realistically you might not even get the privilege to own your own home at all.”

Summing it up

The housing crunch in Australia is a complex issue that has various contributing factors. The demand for homes and limited supply have increased prices and made it increasingly difficult for many Australians, particularly the younger generation and those on lower incomes, to afford suitable housing. The rental market is also experiencing a crisis, with incredibly low vacancy rates and soaring rental prices. Additionally, the challenges faced by construction firms in building more homes further exacerbate the situation.

To address these challenges, there is a need for increased investment in social and affordable housing and initiatives to incentivize the construction of new homes. By providing stable and secure housing options for all Australians, regardless of their income level, we can work towards creating a more equitable and sustainable housing market.

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