What Do We Do About the Lack of Affordable Property?
The news is great right now for existing property owners, but for those trying to get into the market, or grow their investment property portfolio, 2021 is going to be a real nail biter.
Competition is fierce post-2020, with recent surveys finding that almost half of Australian millennials want to buy property in the next 5 years. Consumer confidence is also high, with low interest rates, a stable cash rate and a ‘survival mentality’ causing many to shift focus to secure their future. But all the buyers in the world mean nothing if there is a shortage of affordable properties. Lack of supply in some markets has made the transition to the next stage of life impossible for many buyers. Last year gave many the opportunity to make huge progress on deposit savings, yet today many are left in limbo with huge deposits yet still no property to be found within their budget.
The irony of course is that low stock is pushing up housing prices so those who got in last year are vigorously patting themselves on the back right now. So, what can be done about the lack of supply of affordable property across the country? New stock could come from existing homeowners cashing in on a strong market, but there’s also the risk they’ll stay put in fear of not buying better, thus limiting new stock availability. High rental vacancies in Sydney and Melbourne may work in the market’s favour; owners are selling up their investments in despair over low rents and in Victoria particularly – new changes to rental laws that do not favour the landlord. Additionally, the regional exodus is freeing up metropolitan properties as city dwellers caged for months on end in lockdown flee to the country.
Sometimes the solutions lie in accepting what cannot be changed and actioning things were change is possible. Both Victoria and Western Australia’s state governments are putting significant resources into tackling their individual social housing crises; the benefits of which will flow into the market in years to come. The various Home Builder Grants and incentives offered state by state will certainly provide some stimulus, but time is of the essence here also. With stock availability options limited – new houses can only be built so fast (especially with COVID guidelines affecting construction timelines) - the solution may lie in taming the market itself. Interventions such as increased lending restrictions may be useful and in fact are being predicted by some economists as a good strategy to slow things down. Higher interest rates would help too, though given Australia is very much still transitioning through its economic recovery these are unlikely for this year.
Until we are ‘in the clear’ economically, it’s hard to predict if any dramatic changes will be made by the RBA, or the various governments. Given the extraordinary amount of diligence, patience and resilience demonstrated by so much of the population during 2020, maybe the best solution is simply to wait it and out and see if the market will naturally correct itself.