For those who aspire to home ownership – and if not ownership then affordable rentals – 2017 has begun with signs of promise. The median prices of houses and units in the five mainland state capitals rose 7.7 per cent in the past calendar year, the slowest rate of increase since 2012. The across-the-board increase of 4.3 per cent in median apartment prices was also the weakest in four years. The news from Perth and Darwin has been even better – house prices actually fell in the December quarter in these two cities, as did rents for houses and apartments.
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It's unlikely prospective house buyers and renters in Canberra, Sydney or Melbourne are dancing with joy, however. In the December quarter, Canberra house value jumped 5.6 per cent to a new record median price of $684,395. Median house prices in Sydney and Melbourne also reached new record highs in the December quarter – $1.1 million and $795,447 respectively. The cost of leasing a house in Canberra rose 7.5 per cent over the calendar year to $500 a week while weekly apartment rentals jumped 7.7 per cent to $420 – despite units prices dropping 2.2 per cent over the same period.
Whilst the apparently never-ending surge in Australian property prices may drive renters and aspiring home owners to despair, it is a source of unalloyed joy for investors and owner-occupiers. For banks, builders, component suppliers, and state and federal governments too. Indeed, cynics might argue that home ownership has been priced out of the reach of younger Australians in large part because governments, financial institutions and construction companies are dependent on and addicted to the easy profits and taxes that high property values generate, and are happy for them to continue.
As commenters freely concede, housing affordability is a multi-factorial problem – one best approached by a willingness on the part of politicians to consider all avenues, be they related to taxation, land supply, buyer concessions or housing regulation. However, for reasons that have less to do with logic and hard evidence and more to do with wishing to avoid fights with influential constituencies, governments continue to avoid a holistic approach.
The Turnbull government is investigating the feasibility of a new funding mechanism for affordable housing, but has ruled out changes to negative gearing. The new NSW Premier, Gladys Berejiklian says she wants to increase housing supply but won't alter the rates of stamp duty, an impost that adds tens and hundreds of thousands to Sydney house prices. This craven approach has propelled Australian property to stratospheric levels. Sydney prices are exceeded only by those of Hong Kong. Mortgage debt over property issued by banks is approaching $1.5 trillion, and many Australian households are carrying large debt loads. That might be manageable if interests rates remain low, but indications are that they are headed up.
While high immigration levels may continue to underpin real estate prices, predictions of a major correction cannot be dismissed as groundless.
