Home ownership may be the great Australian dream, but it’s a dream that remains out of reach for many Australians. The State of Australian Cities report by Infrastructure Australia, released last month, highlighted yet again that the rise in Australian house prices over the past decade is among the highest in the developed world.
While housing affordability improved slightly earlier this year, it declined once again in the September 2011 quarter. According to the Real Estate Institute of Australia (REIA), mortgage repayments gobble up 34.6 percent of the average family income. This is lower than the record level of 39.5 percent in June 2008, yet still high compared to other countries. It’s even worse for lower income households, which spend up to 50 percent of their income on housing costs.
“Housing is the single biggest cost of living issue in Australia. When low-income households spend more than 30 percent of their income on housing costs they are officially in housing stress. This means they have very little left over to cover other costs like food, transport, bills or money for emergencies,” said Sarah Toohey, campaign manager for Australians for Affordable Housing (AHH), a community lobby calling on both the federal and state governments to address the issue of housing affordability.
Figures from AHH show that in the past 10 years, house prices have risen by 147 percent, while incomes rose by a more modest 57 percent.
REIA is proposing a solution to the issue of housing affordability – it has presented a plan to the federal government to allow first-home buyers to access their superannuation and use the money to buy a home.
“With the number of first home buyers participating in the housing market declining considerably over the past two years, it is crucial that we look at ways to assist this group to enter the market,” said REIA acting president Pamela Bennett.
The scheme proposed by REIA is already in operation in Canada. The Canadian Home Buyer’s Plan was introduced as far back as 1992 and allows first-home buyers to withdraw up to $25,000 from their retirement savings plan to buy or build a home.
It’s not all doom and gloom, however. The recent interest rate cut by the Reserve Bank of Australia, by 25 basis points to 4.5 percent, will offset some of the pain and ease affordability for many Australian households.