Australia Planning To Target Current Housing Crisis In National Budget

Australia is planning to address their rising home prices in its national budget, as many citizens are currently struggling with the lack of affordable homes on the market. 

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Australia is currently planning to address the housing crisis that is causing prices to increase and shortening the supply of available, affordable homes within its national budget. 

The Reserve Bank of Australia has been making “aggressive monetary tightening efforts,” according to CNBC. Home prices have been steadily rising, and recent data from the property consultant group CoreLogic revealed that home prices have consistently risen for 15 months in a row.

The average price for a home in Australia is currently 779,817 Australian dollars (USD $530,115). Rent pricing is rising by 7.8% annually, according to the Australian Bureau of Statistics which released data last month. This marks the biggest jump since March 2009. 

Eliza Owen, head of research at CoreLogic Australia, predicted that home values will continue to rise this year, but it will likely be less than the increases in 2023.

“Affordability is currently at the worst levels on record in Australia from a mortgage serviceability perspective.”

Jim Chalmers, treasurer, is set to deliver the budget this week with a major focus on the current housing crisis. The Albanese government has stated that it plans to allocate 88.8 million Australian dollars (about USD $58.7 million) that will be used to train 20,000 local workers in construction and housing sectors. 

They also are planning to spend AU $1.8 million on “streamlining skill assessments for 1,900 potential migrants and prioritizing 2,600 for targeted occupations,” according to CNBC

According to a recent report from PopTrack, new builds and the supply of new housing has mainly been due to a rise in construction costs, labor, and a shortage of materials. The Reserve Bank of Australia also confirmed this at a recent board meeting. 

“On the supply side, new housing has been constrained by ongoing capacity constraints – particularly for finishing trades and where the requires skills were easily transferable to non-residential construction – and rapid increases in construction costs.”

Owen also explained that a major increase in migration to Australia has caused housing supply to decrease. “You have a slower rate of completion in new dwellings amid an influx in arrivals who need housing.”

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“There’s an extraordinary mismatch in the supply and demand for housing in Australia at the moment. Most recently the contribution to that mismatch comes from record highs in net overseas migration amid a choke-hold on the residential construction sector from increased material cost and tight labor supply.”

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The Australian Bureau of Statistics also stated that the nation had experienced a net gain of 518,000 individuals in the year ending in June 2023, the largest gain since they began taking records. ABS reported that about 75% of migrants arrived on temporary visas, a majority of which were international students studying abroad. 

The National Housing Supply and Affordability Council (NHSAC), stated that Australia’s limited housing supply is partially due to “the resumption of migration at pace, rising interest rates, skills shortages, elevated construction company insolvencies, weak consumer confidence, and cost inflation.”

“These all combine to create an environment in which prices and rents are growing faster than wages, rental vacancies are near all-time lows, 169,000 households are on public housing waiting lists, 122,000 people are experiencing homelessness and projected housing supply is very low,” they added.

“The result [of all this] is you get a falling rate of home ownership, more demand pressure on an already tight rental market, and then that cascades to the most vulnerable in our society, for example greater reliance on homelessness services,” said CoreLogic’s Owen.

“We’re seeing real estate as a bigger driver of the wealth divide between wealthier and lower-wealth households, because income growth can’t keep up with prices. Higher housing costs for renters and recent mortgage holders also weigh on our productivity and economic capacity because there’s less money left over for personal investment,” Owen said.