February 2023

Real Estate Round Up #55

Sydney housing crisis

Despite John McGrath stating that in January the market cycle was either near to, or at the bottom of the downturn and therefore a good time to buy, this is arguably a relative statement. For example, an article in the Herald writes that house deposits are still many tens of thousands of dollars higher than they were 3 years ago due to rising mortgage rates, and that the median house price is $330k higher. In addition, Institute Australia (amongst others) writes that according to RBA data, real wages (wages adjusted for inflation) in 2023 will effectively be where they were in 2008. Ie they’ve gone down whilst housing prices have sky rocketed.

On the flipside, if you are not ready (or not interested) in purchasing, an article in the Real Estate conversation writes that the number of rental vacancies available continues to fall, and are now at their lowest number since 2013, even taking into account the fact the Sydney population is over 1.5 million people more. As has been written many times, property development and especially lower cost and/or social housing are falling further and further behind.

Meanwhile, demographic shifts are also impacting the Sydney real estate market. The latest census data revealed that the city’s wealth is wildly outside the Australian norm, with inner Sydney being one of the wealthiest regions in the country. This has led to a mismatch in demand and supply, with many singles and lower-income households struggling to find affordable housing in the city. One particular suburb not commonly associated with singles, was identified as having the highest percentage of singles in the city, highlighting the changing demographics and resulting impact on the real estate market.

Challenges Facing Housing Affordability and Cost of Living in Australia

In recent news articles, there has been a focus on the challenges facing housing affordability and cost of living in Australia. One article from ABC News states that up to one million households in Australia could be facing a “cost of living crunch” due to rising living expenses, such as housing costs, utilities, and food. This highlights the significant challenges that many Australian households are facing in terms of making ends meet.

The Sydney Morning Herald has also published articles that explore the challenges of housing affordability in Sydney. One article discusses how property price growth has been erased in certain suburbs of Sydney, while another explores how inner Sydney’s wealth is wildly outside the Australian norm. These articles highlight how housing affordability is becoming an increasingly pressing concern in many parts of Australia.

A recent money laundering bust by the Australian Federal Police highlighted the vulnerability of the real estate market to illegal activities. According to the report, large sums of money were laundered through real estate transactions, raising concerns about the lack of regulations in the industry. This has led to calls for greater transparency and tighter regulations to prevent future money laundering activities.

The challenges of housing affordability are further compounded by ongoing issues with housing supply and construction. According to research from the Housing Industry Association, house building is set to be at its lowest in a decade, highlighting the ongoing challenges faced in increasing the supply of housing and addressing the affordability crisis.

Taken together, the news articles suggest that there are significant challenges facing both housing affordability and cost of living in Australia. Addressing these challenges will require a multifaceted approach that involves addressing issues related to housing supply, construction, and affordability, as well as taking steps to alleviate the cost of living pressures that many households are facing.