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FIND CASEY | JUNE 2021
findcasey.com.au
Housing Affordability In Australia – A Rental Crises By Warren Strybosch
The crisis around the affordability of rent is becoming an increasing issue for everyday Australians. Currently, the crisis is not about affording your own home but rather about the ability to afford the rise in rental costs. With the increase in the cost of living, rental prices going up, COVID restrictions, no real increase in wages, and many investors moving back into their own investment properties, we are starting to see more and more families being displaced from their rental properties. Many people are finding it difficult to afford a home to live in. We are not talking about the ability to purchase a home but simply the ability to pay rent so you have a roof over your head. What is housing affordability? The term ‘housing affordability’ usually refers to the relationship between expenditure on housing (prices, mortgage payments or rents) and household incomes. The concept of housing affordability is different to the concept of ‘affordable housing’, which refers to low-income or social housing. Affordability for owners Housing affordability in Australia has broadly declined since the early 1980s. The OECD’s price to income ratio index shows an 82% increase between 1980 and 2021 with the house price-to-income ratio in Australia now at 10.3.50. The house price-to-rent ration in Australia is estimated at 114.4. This indicates how strongly the property market with rent prices continue to increase.
Home values up almost 10 per cent over the year The CoreLogic Daily Home Value Index has revealed that home values across the combined five capital cities have risen by 9.9 per cent year-to-date, and 9.0 per cent over the past 12 months.
(Source: Reiv, https://reiv.com.au/market-insights/victorian-insights)
Loans for investment properties continue to gain pace, while owner-occupied lending slowed in April, according to new APRA data. The latest monthly authorised deposit-taking institution (ADI) statistics from the Australian Prudential Regulation Authority (APRA) have showed that total residents’ loans and finance leases increased by 0.2 per cent ($6 billion) over the month of April. In home lending, owner-occupied loans grew by $6.9 billion or 0.6 per cent. However, the rate of growth continues to slow, having previously increased by 0.7 per cent ($8.3 billion) in March. Investor lending has also continued its upward trajectory, with investment lending increasing by $2.1 billion or 0.3 per cent in April. This increased on March’s growth rate when it rose 0.2 per cent ($1.6 billion). Even with increasing property values, investors are still purchasing a lot of the properties in the marketplace, which is placing additional pressure on those seeking their own homes and those seeking affordable rentals. With increased purchase prices, investment owners will want to see more rent being brought in even though interest rates are at historical lows.
Even with Victoria’s lockdown 4.0, this has failed to dampen the auction market in Melbourne, according to CoreLogic. The property research group’s auctions data for the week ending 30 May revealed that there were 1,264 homes taken to auction in Melbourne compared to 261 auctions held in Melbourne this time last year. Despite actions being closed due to lockdown, auctions volumes remained strong in Melbourne, while CoreLogic recorded a preliminary clearance rate of 72.8 per cent in the capital city.
(Source: Reiv, https://reiv.com.au/market-insights/victorian-insights)
Affordability for renters The ABS’ Housing Occupancy and Costs publication indicates that the proportion of households which are renters has increased from 26% to 31%. In addition, the proportion of households renting from private landlords has increased from 18% to 26% over the same period.
