What's hampering housing affordability?

by AB16 Jul 2014
Australia’s worsening housing affordability has been blamed on investors and foreign buyers but apparently this is not the case, a new report has claimed.

The Centre for Independent Studies report says both foreign and domestic investors have been made scapegoats when it comes to housing affordability, but they are no more to blame for rising house prices than first-home buyers, report author Dr Stephen Kirchner said.

Rather government policies have increased demand for housing without tackling regulatory and tax barriers to new housing supply.

“Australia has enjoyed strong incomes, population growth and lower mortgage rates, and these, together with a critical lack of new housing supply, have fuelled long-term increases in real house prices.”

Kirchner claimed the problem is not too much demand, but too little supply.

The supply of new land for housing has declined over the last decade, by an average of 21% for the five major capital cities (Sydney, Melbourne, Brisbane, Adelaide and Perth).

This has pushed the price of land for new housing up by 148% to an average of $504 per square metre.

“Land supply and the intensity of land use need to be freed-up to accommodate rising demand,' Kirchner said.

“State and local governments need to relax their planning, development and zoning controls so new housing construction becomes more responsive to rising prices.”

While house prices have increased significantly since 1970, Kirchner said there was no reason to think rising house prices constituted an asset price “bubble”.

“The long-run trend in house prices is well-explained by economic fundamentals.”


  • by Simplistic 16/07/2014 10:18:10 AM

    This may explain land & package prices in the outer suburbs, but not the crazy prices closer to the CBD and top quality high school zones favoured by education focussed migrants. Decentralisation and incentives to push major businesses and jobs away from the city and into outer suburban and regional towns is needed to alleviate pressures and demand in Melbourne & Sydney. You can't live too far from your job, and the cities roads are now grid-locked.

  • by Warren Ross 16/07/2014 9:07:00 PM

    What, no mention of bank overlending, negative gearing, tax avoidance. Just rip out all the regulations? That should really help first home buyers.