The issue of housing affordability in Australia was once confined almost entirely to home ownership, but has now boiled over into the rental market. Is it even possible to unwind a property bubble that's been two decades in the making?
Almost everyone recognises the problem. Some have good ideas for solutions. And yet, despite all the talk, a fix is as elusive as ever.
Higher prices coupled with the highest interest rates in more than a decade. That's a lethal combination when it comes to new entrants.Just as in the US and elsewhere in the developed world, a rate cut would deliver welcome relief in any upcoming election campaign, offering the chance to argue that housing costs had been lowered.
For a while, everyone was happy. You may have paid a fortune, but within a few years, you were well ahead through capital gain. And your repayments kept falling as rates were cut.But that all changed when inflation took hold in the aftermath of the pandemic. Barring another economy-busting crisis, interest rates are unlikely to ever again drop to zero, baking in the unaffordability aspect of our property bubble.
It now accounts for the bulk of household wealth and largely determines our spending habits. When property is on the rise, we feel wealthier and slap down the credit card.Landlords are buying every third property that hits the market, as house values continue to grow. One experts say it's keeping house prices out of reachIt's being quaintly referred to as the Bank of Mum and Dad, with all the accompanying warm and folksy good humour the news industry can muster.
But Bill Shorten's proposed partial unwinding of those incentives delivered a "miracle" win to Scott Morrison in 2019 and effectively killed any political will to touch them again, at least in the immediate future.As the RBA minutes noted a fortnight ago, rents and prices were being driven by strong demand and some of the weakest housing starts in years.
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