Australia's property obsession has taken an even darker turn of late as headlines reinforce the pervasive sense of desperation and hopelessness afflicting first home buyers all over the country. The great Australian dream of affordable home ownership has turned to a nightmare, the cost of living has gotten out of control, and market conditions have made it impossible for young people to achieve the same milestones as their parents and grandparents.
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Meanwhile, mortgagees and aspiring homeowners alike are gripped with suspense over the movements of interest rates, putting them on a wild roller coaster ride with no end in sight.
The government is flagging housing affordability as a top priority but its solutions so far seem lacklustre and fail to acknowledge the structural issues that got us in this mess in the first place. Much like other wealthy nations around the world, Australia is grappling with stagnant wages, high housing prices, and increased competition between first home buyers and cashed up investors. Like other countries, political will to solve the problems seems to vary with the election cycle.
A Resolve Political Monitor poll found two-thirds of young Australians have given up on home ownership, though many of them work professional careers and earn a middle-class income. Instead of embarking on the next phase of their lives like settling down to start a family, they are being forced to move back in with their parents or compete with other young people to live in crumbling share houses.
The Australia Institute says housing cost nine years of the average household income 25 years ago. Today that has risen to 16.5 years of the average annual household income. A report by Aussie found first home buyers were a substantially smaller component of housing demand, dropping from 22 per cent 25 years ago to roughly 17.4 per cent of buyers today. Unable to afford the high premiums, this cohort continues to decline even as house prices rise.
Though welcome in some quarters, interest rate cuts are a double-edged sword, making it easier for those with means to swoop in on property bargains while locking out those without. As the second most expensive property market in the world, the threat of Sydney's property prices spiralling even further in the event of a rate cut has given the RBA pause.
With one-third of Australians servicing ever-increasing mortgages and roughly one-third currently in the cutthroat rental market with no way out, it's no surprise a sense of desperation and hopelessness has taken over. Those who aren't utterly defeated by the impossible numbers are left with a huge fear of missing out. While it's laudable the government is trying to increase housing supply, problems associated with poor quality buildings and financially ruinous defects are yet another trap for first home buyers.
On the supply side, boosting the number of dwellings is an obvious fix, though plans to do so are being mired by fierce opposition from those who are opposed to increasing housing density. Facilitating more workers to enter the construction industry such as the government's plan to spend part of the budget to educate 20,000 construction workers at a price of $90,000 won't do much to salvage the construction companies that are currently in financial strife. Labour shortages, cost of building materials, inflation and mass insolvencies are complex problems - throwing money at them won't necessarily make them disappear.
Sooner or later, a reckoning will occur and there will be far-reaching consequences stemming from the lack of access to this most basic of needs. For starters, young couples will have to move away from expensive cities to regional areas with fewer job opportunities. Cities like Sydney risk becoming a "city with no grandchildren", the Productivity Commission says. Essential workers like teachers and nurses can no longer afford to live in metropolitan cities which spells a decline in healthcare and education.
Meanwhile, those who are lucky enough to inherit or are being given outrageous cash gifts will become part of a two-tier society in defiance of Australia's egalitarian values. Finally, young people who have given up on the idea of starting a family or building their careers as they don't believe they could ever afford to buy a home in their lifetimes have little to look forward to. We must fix our dysfunctional relationship with property ownership before all hope is lost.
- Michelle May is a buyers' advocate and principal of Michelle May Buyers Agents.
