The latest report from the Grattan Institute’s on housing affordability. In the report, it is shown what the result of 30 years of Australian policy built on soaring housing prices has left vast swathes of people increasingly shut out of the housing market. Rates for home ownership are declining amongst all Australians younger than 65, and especially those on lower incomes. Affordability has fallen so much for those in the lower income bracket because the prices of the lowest-cost dwellings have actually increased at the fastest rate over the past decade.
Also affecting affordability and the availability of low cost housing has been migration. Since 2005, net overseas migration has averaged around 200,000 people per year, a 1005 increase from the 100,000 recorded in the previous decade. The effect on housing from immigration can be best seen in the cities. As of 2011, 86% of immigrants lived in the major cities in Australia, compared to 65% of the native Australian-born population. The rise in immigration coincides with the most recent boom in housing prices. Melbourne and Sydney are receiving and housing more migrants than ever before. House prices in Australia overall have increased 50% over the past five years, but have risen by 70% in Sydney.
The boom in house prices has been seen all over Australia and has fueled other employment areas too. Master painters brisbane report that work has never been so busy and the Brisbane painters are not the only ones. The rise in house prices and the free movement of people has led to a rise in services such as painting and decorating and garden maintenance services. More people are employing the services of tradesman to spruce up their home and this has sparked a self employed boom across Australia.
However, what comes up must come down and the question being asked by analysts is can the bubble in the Aussie housing market continue? Well first, let’s ask ourselves, are we in a bubble? The easy answer to that question is NO,Australia is not in a bubble and importantly property values are not going to suddenly collapse! Ok, house prices in Australia are relatively high when compared to other parts of the civilised world, however rising prices per se do not cause a housing bubble in itself. What is needed is to create a bubble is for the increased to be driven by leverage or increased borrowings. These make the banking system unstable, fragile and prone to collapse, a scenario which cannot be described of Australia at the moment.