According to a new study by financial services comparison site finder.com.au, 63 per cent of respondents, which included economists, believe that reducing competition by increasing the supply of housing could be the answer to Australia’s housing affordability crisis.
Graham Cooke, insights manager at finder.com.au, said: “Creating more housing could ensure first home buyers aren’t being priced out by buyers or investors with deeper pockets.”
The Housing Industry Association (HIA) suggested in a report in April that if the nation’s population continues to increase at the current rate of 1.6 per cent per year, and household income remains relatively stagnant, an average of 215,123 homes would need to be built every year until 2050 to reach a balance between supply and demand. This is compared to the “record” 233,544 dwellings built in 2016.
The residential housing industry body also noted that in 2017–18, the supply and demand for new homes were at the “closest to equilibrium as [they have] been in the last 15 years” on a national level, with dwelling commencements across Australia expected to have exceeded 217,000 in 2017.
Among the other measures that could improve affordability for first home buyers (FHBs) include reducing or abolishing stamp duty, which was selected by 53 per cent of respondents to finder.com.au’s monthly RBA survey, while 37 per cent said that targeting investors with stricter rules on negative gearing could help FHBs with affordability.
Other respondents said that relocating to smaller cities or regional centres and boosting infrastructure and transport to regional areas, which the Australian government promised to invest on in its budget for 2018–19, could improve affordability.
Conversely, 16 per cent of respondents said that nothing needs to be done to address housing affordability, a substantial rise from 3 per cent in May 2017.
Finder’s Economic Sentiment Tracker also showed that 33 per cent of respondents feel positive about housing affordability, an increase from 23 per cent in July, which the comparison site speculated could be a result of the nationwide fall in property prices.
Respondents were also asked to provide predictions for auction clearance rates (ACRs) across Australia’s capital cities. Sydney’s ACR forecasts dropped to around 50 per cent in July, with most respondents (81 per cent) expecting it to remain at 50 per cent or less at the end of 2018.
Brisbane’s ACR was also predicted by 93 per cent of respondents to stay below 50 per cent at the end of the calendar year.
“Brisbane’s recent clearance rate of 36 per cent suggests residential property market appetite has weakened, and buyers are sitting on the sidelines,” Mr Cooke said.
Clearance rates fell in Adelaide by 5.1 per cent during the April–June quarter to 60.6 per cent, in Brisbane by 6.2 per cent to 42.8 per cent, in Canberra by 1 per cent to 66.9 per cent, in Melbourne by 7.3 per cent to 61.1 per cent, in Perth by 3.4 per cent to 31.3 per cent, and in Sydney by 7.6 per cent to 56 per cent.
Additionally, all respondents (31) to finder.com.au’s survey expected the Reserve Bank of Australia (RBA) to hold the cash rate at the record low of 1.5 per cent in August.
Shane Oliver, chief economist at AMP Capital, told finder.com.au: “Growth has picked up a bit and the RBA is optimistic, but inflation and wages remain too low, property prices are falling in Sydney and Melbourne, the housing construction cycle has peaked and uncertainty remains around the outlook for consumer spending.
“So, it’s way too early to hike, but [it’s] hard to mount a case for a cut either right now. So, best to remain on hold.”
Jo Horton, senior economist at St. George Bank, also identified trade concerns as well as rising whole funding costs as potential reasons for the RBA keeping the cash rate at 1.5 per cent for an extended period of time.
Jacqueline Dearle, head of corporate affairs at broking franchise Mortgage Choice, noted that tightened lending standards and increased scrutiny of a borrower’s living expenses will also support the RBA’s decision to keep the cash rate on hold.
None of the respondents predicted a cash rate rise this year, though three said that they expect a decrease before 2019.