Ladder Pulled Up On Aspiring Homeowners, As Affordable Properties Disappear

Homes selling for $500,000 or less have become scant in Sydney, and housing hopefuls with budgets under $1 million are direly pressed for choice.

Figures released by research firm Suburbtrends paint a bleak picture. “Australia’s housing affordability crisis is no longer just another turn of the boom-bust cycle — it’s a structural failure decades in the making,” wrote Kent Lardner, its founder, and Head of Research at fellow analytics company FOUNDIT.

Homes for $500k nearly non-existent

The research indicates that the entry level of the housing market “has all but collapsed.”

Last year, merely four per cent of homes sold in Greater Sydney went for under $500,000, or less than one in 25. This was the lowest proportion recorded in any major capital city; the proportion in Greater Melbourne was 15 per cent.

In Sydney, the majority of these properties were spread across several western suburbs. The same was true for properties priced between $500,000 and $750,000, most of which were one-bedroom high-rise flats.

With most of the available stock under $1 million concentrated in particular areas, and with listings therein expanding little, aspiring buyers have been forced into steeper competition for the relatively few affordable homes. 

Policy responses have worsened matters, says expert

Lardner is critical of government efforts to resolve the crisis by stimulating demand. Rather than helping young Australians, grants for first-home buyers, shared equity schemes and tax breaks have worsened the situation by inflating entry-level prices, he posited. The result has been the destruction of the first rung of the home ownership ladder in most capitals.

“Increased buyer demand, fuelled by easier access to credit, has coincided with stronger price growth in lower-priced homes,” the acclaimed housing-market wonk noted.

“Rather than improving affordability, these schemes have created greater competition and higher prices for first-home buyers.”

Call for changes to ownership law

Lardner proposed a number of solutions. One was to restrict non-resident buyers’ access to leasehold properties, channelling overseas capital into the financing of affordable developments without driving up leasehold prices.

Another was to zone land specifically for leasehold housing, allowing for public land to be sold or leased to developers for lower prices, provided that homes are sold by 30-year lease agreements. These “should be homes for those who’d otherwise be locked out,” rather than becoming a backdoor for investors.

Legal ownership of land should be separated from that of dwellings upon the land, he argued. This would allow for public ownership of land to be retained, and for banks to lend to buyers with the lease as security. Variations of this principle include Community Land Trusts and land rent schemes.

One suggestion bound to ruffle feathers is a public campaign to “normalise the concept of home ownership with a time limit.”

“With clear legislation, a 30-year property right can be just as secure as a freehold during its term.”

More housing construction is needed, Lardner emphasised, particularly of pre-fabricated homes.