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The economy has seen various ups and downs in recent years following a chain of global events. We have had trade restrictions, inflation, rate rises and a cost-of-living crisis on our hands, with seemingly little end in sight. There’s no denying these events have made a significant impact on home owners and renters alike.
Interest rates have risen sharply in recent months, which has influenced the ability of borrowers to pay their mortgages. While some borrowers built up buffers over the last couple of years in the form of early repayments and substantial savings while rates were at a historic low, others were not so lucky. Many borrowers who had recently bought had a lower income with low or no buffers. This demographic is considered extremely vulnerable to further hikes in interest rates.
Tenants have also seen an increase in rent prices across the nation, which is expected to continue into 2023. Figures in Banner Asset Management’s September Quarterly Report show house rent prices in Melbourne increased by a staggering 2.2 per cent. Sydney saw a rise of 4.8 per cent and Brisbane, 5.8 per cent. Most cities are seeing record-high prices or nearing a record high.[1] With the rise in rental prices across every major city combined with increased inflation and a drop in employment rates, many Australians are feeling the strain.
With international borders open, we are also seeing an increase in the arrival of migrants and students similar to pre-pandemic figures. This number is set to rise in future years, with permanent migration lifting from 160,000 to 195,000 in 2022–23. Net overseas migration is also set to recover from 150,000 in 2020–21 to pre-pandemic levels of 235,000 in the next financial year. The arrival of new residents, as well as an influx of Australians moving interstate and to regional areas, has put an additional strain on housing markets that were already struggling.
Amid this growing housing crisis, the government has announced new measures to address the high cost and low availability of housing, placing focus on making suitable housing more accessible for low-income households.
The new Labor government has promised to tackle the supply side of the market with a new Housing Accord agreed on with the states, territories, and major private investors. This program aims to build one million new homes over the course of five years.
Under this accord, state and territory governments must meet supply targets by re-zoning properties and freeing up land to make room for these new homes. Construction will be backed by capital from the $3.3 trillion superannuation sector and is scheduled to commence in 2024.
Additionally, the government will separately provide $350 million over five years beginning in 2024–25 to assist in funding an additional 10,000 affordable homes. The Future Fund will be handed an extra $10 billion for a Housing Future Fund, which is to be invested towards an additional 30,000 social and affordable homes over a five-year time frame.
Other measures being taken to tackle the housing crisis include $350 million scheduled to be spent on acute housing needs, measures to encourage older Australians to downsize their housing and support for 10,000 people per year in regional areas to buy homes with a smaller deposit.
While the housing crisis is ongoing, these upcoming projects funded by the government will deliver a much-needed helping hand. We are likely to see conversations surrounding the crisis change over the coming years as more suitable, affordable housing appears on the market.
Andrew Turner is the chief executive of Banner Asset Management.
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