One of Australia's leading economists, Chris Richardson, has criticized the housing market in Australia, describing it as a "misery machine." Despite the Reserve Bank's 13 interest rate increases in just 18 months, house prices continue to reach record levels. Richardson identifies rapid population growth as the primary reason behind this escalating problem.
According to Richardson's assessment on the ABC's Q+A program, the average middle-market house in Sydney, Melbourne, and Brisbane is now unaffordable for average full-time earners, even those on a low six-figure salary. Richardson's previous belief that interest rates would alleviate the situation has been debunked, leading him to emphasize the urgent need for increased construction of high-rise units and a reduction in immigration.
Richardson acknowledges the challenges posed by expensive housing in Australia, primarily due to cumbersome council and planning department regulations. He argues that after four decades, Australia has failed to adequately address this pressing issue and must now consider immigration as part of the equation.
The latest statistics reveal a significant shortfall in the number of homes needed to house the growing population. In the last financial year, Australia constructed only 168,231 private homes, resulting in a shortage of at least 140,000 residences. To confront this housing crisis, Prime Minister Anthony Albanese announced a plan to build 1.2 million new well-located homes over the next five years, pressuring states to change planning laws that hinder high-rise apartment developments.
Despite interest rates being raised to combat high inflation, Sydney's median house price has increased by 12.1 percent since January. This surge has exacerbated the issue of mortgage stress, with borrowers needing an annual income of $186,251 to avoid owing the bank more than six times their salary. Furthermore, renters are facing challenges, as the national rental vacancy rate stood at just one percent in October.
Richardson proposes reducing the intake of international students to alleviate the housing shortage, particularly in Sydney, where median weekly house rents have reached $1,012. He points out that Australia's population growth rate of 2.2 percent is among the highest in the developed world, emphasizing the need for immediate action.
The Australian housing market is in dire need of solutions that go beyond interest rate adjustments. Addressing the shortage of affordable housing requires a focused effort on increasing construction, reducing red tape, and carefully examining immigration policies. Failure to act could have severe consequences for the country's economy and its citizens' living standards.