Author: Greville Pabst, CEO, WBP Property Group
 

Recent studies have revealed that Australia has amongst the lowest housing affordability in the civilised world.

When compared with major property markets including the US, Canada and UK, Australian capital cities were found to have amongst the lowest levels of affordability, with Melbourne and Sydney offering less affordable housing than major international cities London and New York.

These dramatic findings follow from Australia’s notably positive performance during the GFC, which saw house prices around the country jump to record highs in the recent quarter, with no relative increase in wages. Affordability also eroded further due to recent rises in Australia’s interest rates.

When comparing property values with wages, property owners in Melbourne and Sydney are paying a greater share of gross annual income towards mortgage repayments than any other home owners of those countries surveyed, some sources indicating in excess of 50%.

There are growing fears that Australia’s housing affordability crisis will worsen as demand increases from a growing population and overseas investors and due to government regulations constraining the speed of development and the construction of new housing. In Australia current land use regulations mean that in some instances it can take more than 10 years to establish urban fringe land as suitable for new housing; this delay further exacerbating the disparity between supply and demand.

As a result, in the future we will see a trend towards the construction of smaller more sustainable homes, which up until recently had grown in size by more than 30% in only the last 20 years. Housing styles are already changing to make better use of floor plans, aspect and natural lighting to reduce building costs and land use.

But with only a limited release of land in outer fringe areas and land values on the rise many buyers are now also seeking the alternative higher density apartment and unit living. Apartments offer the benefit of increased affordability but are also often more strategically located with access to good public transport infrastructure and facilities.

However, while both units and houses exhibited strong growth in 2009 the unit market outperformed its housing counterpart across the county, further evidence of the growing movement towards this style of more affordable accommodation.

With the maintenance of strong market fundamentals including strong population growth, consumer confidence and low interest rates Melbourne’s property values will continue to perform well in 2010, particularly in inner city areas.

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This article was published in the Saturday Herald Sun 6 February 2010.