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{{propApi.successMessage}} {{region}} Change locationIncreasing the supply of housing requires federal government action
Increasing the supply of housing requires federal government action
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“Housing affordability across Australia has continued to decline as interest rates continue to rise. It now requires 1.6 average incomes to service the typical new mortgage, compared to 1.2 incomes in 2019,” stated HIA’s Deputy Managing Director for Policy and Industry, Jocelyn Martin.
Friday, 23rd June 2023
HIA’s Affordability Index report was released today. The Index is calculated for each of the eight capital cities and regional areas on a quarterly basis and considers the latest dwelling prices, mortgage interest rates, and wage developments.
“The HIA Affordability Index fell by 1.1 per cent in the March Quarter 2023 compared to the preceding quarter, making housing in Australia 25 per cent less affordable than it was before the pandemic,” added Ms Martin.
“Housing affordability poses a major challenge across the country, and the issue is paramount on the policy agenda of all levels of government. It is crucial to identify policies that would work and those that would not, and it begins with a supply-and-demand balance.
“Rising interest rates are only a part of the story. Housing affordability simply gets worse when housing supply falls short of demand.
“This makes measures that do not increase the number of homes, such as convoluted planning processes and the heavy burden of taxation, likely to fail. The Australian Government has spoken widely about a plan to pass legislation, ‘The Housing Australia’s Future Fund Bill 2023’, which aims to improve the quality of housing data, improve forecasting of housing demand, and collaborate with states and territories to improve the supply of housing.
“This legislation has been held up in Federal Parliament over the mechanism to fund investment in public housing, and this is delaying changes to policy that will begin to address the failures that are constraining an improvement in the supply of new homes.
“In addition to the passage of this legislation through Parliament, there is also a need to reform state government taxes that have forced foreign investors out of the market. The impact of these taxes has seen foreign investors withdraw from the Australian market and consequently the number of apartments commencing construction fell to barely more than a third of its peak in 2016. Foreign investors do not force up house prices because they cannot buy existing homes. They can only buy new homes and improve the supply of rental accommodation and ease this shortage.
“A large investment by state and federal governments in public housing stock isn’t going to be sufficient to increase the supply of new homes to meet demand. The HAFF Bill 2023 isn’t going to solve the acute rental shortage this year, but it does begin a pathway to accountability for each tier of government and will assist in restoring balance,” concluded Ms Martin.
The HIA Affordability Index across all capital cities saw the largest fall in Perth, declining by 2.2 per cent in the March Quarter 2023. This was followed by Sydney (-1.9 per cent), Melbourne (-1.3 per cent), Adelaide (-1.3 per cent), Darwin (-1.1 per cent), and Canberra (-0.8 per cent). Brisbane registered almost no change to its Index, while Hobart was the only capital city that registered an improvement in affordability (+1.3 per cent).
The most significant deterioration in regional affordability was in South Australia, down by -3.7 per cent in the March Quarter 2023. This was closely followed by regional Northern Territory (-3.6 per cent) and regional Western Australia (-3.3 per cent), with declines also seen in regional New South Wales (-1.1 per cent), regional Queensland (-1.1 per cent), and regional Victoria (-1.0 per cent). Regional Tasmania saw an improvement in affordability, with the Index up by 0.6 per cent in the quarter.
“The HIA Affordability Index fell by 1.1 per cent in the March Quarter 2023 compared to the preceding quarter, making housing in Australia 25 per cent less affordable than it was before the pandemic,” added Ms Martin.
“Housing affordability poses a major challenge across the country, and the issue is paramount on the policy agenda of all levels of government. It is crucial to identify policies that would work and those that would not, and it begins with a supply-and-demand balance.
“Rising interest rates are only a part of the story. Housing affordability simply gets worse when housing supply falls short of demand.
“This makes measures that do not increase the number of homes, such as convoluted planning processes and the heavy burden of taxation, likely to fail. The Australian Government has spoken widely about a plan to pass legislation, ‘The Housing Australia’s Future Fund Bill 2023’, which aims to improve the quality of housing data, improve forecasting of housing demand, and collaborate with states and territories to improve the supply of housing.
“This legislation has been held up in Federal Parliament over the mechanism to fund investment in public housing, and this is delaying changes to policy that will begin to address the failures that are constraining an improvement in the supply of new homes.
“In addition to the passage of this legislation through Parliament, there is also a need to reform state government taxes that have forced foreign investors out of the market. The impact of these taxes has seen foreign investors withdraw from the Australian market and consequently the number of apartments commencing construction fell to barely more than a third of its peak in 2016. Foreign investors do not force up house prices because they cannot buy existing homes. They can only buy new homes and improve the supply of rental accommodation and ease this shortage.
“A large investment by state and federal governments in public housing stock isn’t going to be sufficient to increase the supply of new homes to meet demand. The HAFF Bill 2023 isn’t going to solve the acute rental shortage this year, but it does begin a pathway to accountability for each tier of government and will assist in restoring balance,” concluded Ms Martin.
The HIA Affordability Index across all capital cities saw the largest fall in Perth, declining by 2.2 per cent in the March Quarter 2023. This was followed by Sydney (-1.9 per cent), Melbourne (-1.3 per cent), Adelaide (-1.3 per cent), Darwin (-1.1 per cent), and Canberra (-0.8 per cent). Brisbane registered almost no change to its Index, while Hobart was the only capital city that registered an improvement in affordability (+1.3 per cent).
The most significant deterioration in regional affordability was in South Australia, down by -3.7 per cent in the March Quarter 2023. This was closely followed by regional Northern Territory (-3.6 per cent) and regional Western Australia (-3.3 per cent), with declines also seen in regional New South Wales (-1.1 per cent), regional Queensland (-1.1 per cent), and regional Victoria (-1.0 per cent). Regional Tasmania saw an improvement in affordability, with the Index up by 0.6 per cent in the quarter.
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