The Real Estate Institute of Australia proposed three measures to address supply and affordability. These measures are at their most important moment.
Adrian Kelly, president and CEO of REIA, stated the average homebuyer has fewer choices than ever before, as well as being limited by historic highs in real estate prices.
He stated, “We don’t take comfort in these record-setting prices, which are primarily driven by a shortage of supply.”
“We prefer 10 buyers to enter the market through the availability of 10 homes than 10 buyers bidding for the same home.”
The following is part of the three-point REIA Plan that was presented before the Standing Committee on Taxation and Revenue.
- Eliminating “punitive taxes” in housing
- More homes being built
- Establishment of a national program for housing, which includes the federal government as well as the state governments
Kelly stated that these proposals have a “huge opportunity” to increase affordability and supply in Australia during its transition from the COVID-19-related pandemic.
He stated that stamp duties were too often in the “too tough basket” and that he would love to see stamp-duty reform at the center.
“We recommend several methods to better utilize existing stock of housing and encourage increased listing in order to increase supply in current cycle.”
“This means we have to consider new policy options to encourage rightsizing in Australia as Australia’s elderly population grows.”
Kelly stated that there must be more action and discussion about increasing housing supply, particularly considering the imminent reopening of international borders. This would increase housing demand.
The median price for detached homes is $1m
Domain’s latest report found that the median house value is just a few thousand dollars below $1m.
In September, the median price of a house in the United States was $9994,579. This represents an increase of 3.5% each quarter and 21.9% annually.
Median prices in Sydney and Canberra were higher than $1m.
CoreLogic also released separate figures showing that the median Australian home price (including units), was $686 339 in October.
Accessibility versus affordability
He stated that prices had increased by more then 20% in capital areas and almost 25% in regions over the past one year.
Although rising home prices can be good for household finances, they are not always a good thing. More than a third of Australians rent — for those wanting to buy, higher property prices mean having to save a larger deposit.”
Record-low mortgage rates are a positive sign for housing affordability.
Kelly stated that serviceability has been easier than ever since 2018, when cash rates were 1.5%.
He stated that the cash rate today is 0.1% and the average rate on a new variable loans is 2.7%.
“These low rates mean that even with today’s larger mortgages, average repayments are smaller than in the past.”
Kelly believes this means that many homebuyers are less accessible.
He stated that housing is affordable regardless of price or interest rate.
Market accessibility must be considered when policies are aimed at affordability.
“It’s critical we keep in mind the distinction between servicing a mortgage and saving a deposit,” he said.
“If we conflate the two into all-purpose ‘affordability’, we could end up with counterproductive policies that hurt those we’re trying to help.”