Australia's housing crisis findings
The Whitepaper says the cumulative spending on government policies, such as the first home-buyers grant, capital gains tax exemptions and negative gearing, account for only a small fraction of the more than $7 trillion growth in the value of Australian real estate over the past 20 years. And it finds little evidence that interest rates are the sole driver of house prices over the long term, with price growth strong and consistent over 50 years regardless of whether long-term interest rates were high or low.
“We know what has happened; why it has happened is much less understood,” LongView Executive Chair Evan Thornley said. “If you really want to understand house prices, you need to understand what is different about Australia. Commentators typically focus on interest rates and tax policies. Both matter but they don’t fully explain the growth we’ve seen.
“Nearly every developed country has had record low interest rates, supply constraints and government subsidisation for housing. What sets Australia apart is its consistently high population growth rates and urban concentration. Australian cities are unusual – they are few, they are large, and they all have dense CBDs and expansive suburbs, with not much in between.
“As a result, our analysis shows that the value of land alone accounts for most of the growth in property prices over the past 30 years in Australia. Land appreciates, buildings depreciate – and Australia’s population dynamics mean our land appreciates faster and more consistently than almost anywhere else in the developed world.”
The combination of Australia’s high population growth, the concentration of half the population in the three largest cities and the shape of those cities with high-density CBDs and expansive low density suburbs means well-located land – land where people can live near to jobs and services – is in ever-increasingly short supply and rising in value at rates that make it increasingly out of reach for many Australians.
“Many first home buyers, who are forced to buy far from the centre of cities, are denied the opportunities that may increase their quality of life, including access to the higher paying jobs that are in the central city and employment hubs,” Mr King said. “They aren’t reaping the economic benefits that living in a city should bring, benefits that generations of Australian city and suburb-dwellers have enjoyed. Put simply, our largest cities are now too big for this. This also has serious implications for the challenge of homelessness in Australia, which must be addressed.”
Mr Thornley said: “Buying a home is the biggest economic decision in most people’s lives and affects almost every aspect of their day-to-day experience. That’s why it’s vital we understand what is driving the Australian property market so that we can come up with solutions that actually work – or as we say, solutions that swim with the economic tide. Otherwise we are pretending that we can ignore or overcome the realities that shape our housing market.”
The next instalment of the Whitepaper series will focus on the challenges of renting in Australia, with a third focused on solutions that reflect the economics of the Australian housing market.
For further enquiries:
Jane-Frances Kelly, Head of Strategy and Insights – LongView
M. (+61) 481 133 049 or E. jane-frances.kelly@longview.com.au
Danielle Tricarico, Head of Corporate Affairs – PEXA
M: +61 403 688 980 or E:danielle.tricarico@pexa.com.au
