Some of Australia’s most prominent business leaders are aiming to put pressure on federal and state governments to implement urgent reforms to solve the nation’s housing affordability crisis.
Julie Coates, CEO of CSR—a leading supplier of building products—articulated her view that the problem constitutes a supply issue and that the government has a role in alleviating supply constraints to place downward pressure on property prices.
“Government has a role in building houses to help remedy the housing shortage, but it’s housing affordability that is a potential disruptor for our business,” Ms. Coates told a recent survey this week.
Ms. Coates particularly placed an emphasis on lifting red tape.
“Land release bottlenecks, lengthy approval processes, trade labour shortages and population growth all play into the housing affordability equation and government policy is integral to the solution here too.”
CEO of property giant Mirvac Campbell Hanan concurred, stressing the need for the government to open the floodgates for apartment-building projects in Australia’s largest cities.
Crisis On The Cards
Australia’s housing issue is reaching a boiling point.
In 2023, the Urban Reform Institute—a US-based urban planning think tank—released the annual edition of their housing affordability study in March 2023.
In putting together their research, they created a scale to measure housing affordability based on the ratio of median household incomes to house prices in a given housing market. If an area has a ratio of 3.0 or under, it is considered affordable. A ratio of 3.1-4.0 is considered moderately unaffordable and a ratio of 5.1 or over is deemed severely unaffordable.
Australia has a multiple of 8.1x. Sydney has a multiple of 13.3x, making it the second-most unaffordable housing market in the world behind Hong Kong, which has a multiple of 18.8x.
The housing affordability issue isn’t confined to Australia’s capital cities either.
According to the Australian Bureau of Statistics (ABS), Orange—a NSW country town—has a median household income of A$86,580 (US$58,155) and a median house price of A$690,000 (US$463,473) according to research bureau Corelogic. This gives it a multiple of 7.9x.
This makes Orange a less affordable housing market than Singapore (3.5x) and Washington DC (6.7x).
A Supply Issue?
The underlying cause of the crisis has become a point of contention in Australia’s national conversation. It’s commonly attributed to a lack of supply, a sentiment typically shared by Coalition politicians and property executives.There is also a large contingent of people who attribute housing unaffordability to the commodification of Australian property, a view often held by Labor and Greens politicians.
For example, in 2022, the Greens announced a policy plan to deter speculative investment from the property market by imposing a surcharge on Brisbane landlords who increased their tenants’ rent beyond a certain threshold.
Labor’s front bench has consistently attempted to introduce similar policies, proposing the abolition of negative gearing and raising the capital gains tax as key policies surrounding housing.
In fact, ending negative gearing was a key tenant of former opposition leader Bill Shorten’s 2019 federal election campaign.
“On January 1, 2020, new purchases of existing housing won’t be able to claim a government subsidy,” Mr. Shorten told ABC Q&A.
Mr. Shorten also said that removing negative gearing doesn’t equate to increasing taxes for Australians who own investment properties.
“If I’m not giving you a subsidy for you making a loss on an investment property, that ain’t a new tax. That just means you’re not getting a subsidy.”
Immigration Fuelling Housing Crisis
There is also the reality of immigration.Corelogic’s Head of Residential Research Eliza Owen released a report in Nov. 2023 on the impact of overseas migration on Australian house prices.
She concluded that migration influxes have most immediately impacted the rental market given that 60.8 percent of migrant arrivals between 2016-2021 were renters.
In FY 2022-23, Australia took in a net gain—immigrations minus emigrants—of 518,000 people. Migrant arrivals increased 73 percent to 737,000 from 427,000 in FY 2021-22.
In the same timeframe, the median house price in Australia’s capital cities has jumped 9.3 percent on average.
Some of Australia’s preeminent business leaders are still adamant that high rates of immigration are still beneficial to the nation’s economy overall.
Macquarie Group CEO Shemara Wikramanayake has on many occasions advocated for a continuation of high immigration intakes, claiming it will shield Australia from the effects of global economic turbulence.
“As you all know, immigration has really picked up again. So, that is going to drive underlying growth here, which will shield us a bit from the extent of the downturn that global peers are going to have,” Ms. Wikramanayake said in May 2023.
Elliott Rusanow, CEO of Scentre Group—a property firm owned by Westfield— that the government should take responsibility “to solve housing needs,” but has also previously advocated for further population growth.
