New report reveals depth of housing affordability challenge

The gap between average incomes and average home prices in Australia continues to widen, according to a new report by PowerHousing Australia and CoreLogic released today.

The Australian Affordable Housing Environmental Scan 2017-18 examines the key metrics for housing affordability across the country. It highlights the urgent need to implement new measures, such as those announced in the recent Federal and NSW state budgets, to improve access to the housing market, especially for those on lower incomes such as first home buyers, key workers, seniors and social housing tenants.

The report shines a light on just how acute the housing market participation challenge is for low-income earners, for both renters and those looking to become homeowners. The situation for first home buyers is particularly dire today.

First home buyer rates have continued their two-decade-long downward trend. Over the past five years, the average loan they take out has increased by less than $9,000, while the average dwelling price has gone up by $120,000 nationally and $317,300 in Sydney over this period.

CoreLogic’s Head of Research Tim Lawless noted the report also shows there are some encouraging indicators on the affordability front but risk factors remain. Low interest rates, strong lending finance, a surge in building approvals and subsequent record high dwelling commencements and completions are all positive signs for affordability. Australia has never built as many homes as the number being built today, however there needs to be a sustained level of building over and above the 10-year average rates for there to be a consistent and meaningful improvement in housing affordability, particularly in Sydney.

Sydney incomes are on average higher than other parts of the country yet dwelling prices are more than eight times the median income in Greater Sydney with up to 45 per cent of annual gross household income required to service a loan with an 80 per cent loan to valuation ratio.

As values have increased over recent years, the supply of housing at lower price points has decreased substantially. In Sydney only 3.5 per cent of houses sold over the 12 months to February 2017 transacted for less than $400,000 – this figure was 25.8 per cent of all annual home sales in Sydney five years ago.

Population growth, driven by high net overseas migration and the ongoing strength of household formation rates has created strong demand for housing which attracts the risk of continued house price increases, despite the record levels of dwelling delivery.

According to the report, the outlook for low-income earners will remain bleak while property pricing continues its double digit increases and wages growth remaining low.

The indicators of housing affordability in Australia show that there is an increasing gap between average incomes – particularly those in the lowest two quintiles – and the price of an average home,” Mr Proud said.
In Sydney, it is now almost 13 times more likely for a house to sell for more than $1 million than to sell under $400,000 and it is 2.3 times more likely for a unit to sell for more than $1 million than to sell for less than $400,000.

For houses, there are also more sales over the past year above $1 million than below $400,000 in Melbourne and Canberra. Sydney has more units selling above $1 million than those below $400,000.
But what is equally clear from this analysis of the data is that policy levers available to governments at all levels can and do have a significant impact.

The Federal Budget measures for housing announced in May promise to provide some respite for those in rental stress or struggling at the higher percentage end of the mortgage to income ratio scale.

In the late 1990’s we saw negative gearing and capital gains tax changes drive investor activity, first home owner grants in 2009 saw first home owners reach 30 per cent of all lending finance and foreign investment changes in countries such as Canada contributed to record levels of foreign investment into countries such as Australia. It is clear that housing policy can influence and drive activity into areas of the housing market and boost the provision of housing.

The Australian Affordable Housing Environmental Scan 2017-18 was launched at the PowerHousing Member Exchange in Canberra, which brought together more than 250 delegates from Australia’s largest Community Housing Providers. Collectively, PowerHousing’s 30 member companies provide over 50,000 units of housing worth more than $10 billion and have raised over $385 million to fund the development of affordable housing, providing homes for some 80,000 people across Australia.


A copy of the report can be downloaded here. 

Media Contact:
Kelsey Boivin, PowerHousing Australia, Mob: 0422 836 223,
Mitch Koper, CoreLogic, Ph: 1300 472 767