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Affluence is the problem with housing affordability

Discussion in 'Property Market Economics' started by Nigel Ward, 27th Sep, 2007.

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Nigel Ward Well-Known Member

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1st Jul, 2015

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according to a CBA economic insight available here:

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An edited summary of key points:

Increasing affluence is certainly one of the reasons behind high house prices. Australians now want bigger and better homes than ever before. Today a new home is around a fifth larger than one built a decade ago. And Australian residences are the largest in the developed world.

The problem of housing affordability is shaping up as a hot election topic, but it is only going to worsen. House prices are likely to move higher, as we are already at a relatively low point in the housing cycle. [Are we? I'm not sure] Australians are going to have to adjust their attitudes to buying a home, perhaps initially settling for a smaller residence.

There’s a simple explanation for Australia’s apparent housing crisis – the construction of new homes and apartments is simply not keep pace with our soaring population. There have only been around 150,000 dwellings constructed over the past 12 months. This is well short of the number of dwellings that are required each year, estimated to be around 170,000 homes.[So why is that?]

At present, the choice of where to invest money is glaringly obvious. The local sharemarket has outstripped returns on property over the past four years, posting returns of around 25 per cent on average.[I think that's a logical leap that does not necessarily follow. But of course Commsec has a barrow to push.]

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Nigel Ward, 27th Sep, 2007

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