What’s Up With the Housing Shortfall? Why Affordability is Getting Worse
It’s difficult not to notice the skyrocketing rental prices and housing values in Melbourne. It isn’t all in your imagination, either – recent research by the Housing Industry Association suggests that the current shortfall of around 190,000 homes will more than double, to hit an expected shortfall of 460,000 by 2020.
What’s up with the housing shortfall?
Experts cite several reasons for the housing shortfall. There is no single factor that can be addressed; the current crisis in affordability is borne out of a complex web of factors like:
- Growing population. Population growth is often seen to take from one hand while giving to the other, in both social and governmental terms, so cannot be drastically curtailed.
- Consumer preference for detached houses.
- Amount of land being made available by the government for development.
- The diverse range of planning standards that developers must adhere to (there is a different set of standards for each of the 565 local councils across the country). Bureaucratic difficulties are anecdotally said to add thousands to the cost of new homes.
- The practice of land banking by developers – purchasing and holding land while values rise.
- Higher taxation on new dwellings relative to existing housing.
What should you do?
Given that the housing shortfall is expect to worsen over the next ten years, and interest rates are currently quite low, our thoughts are that potential homebuyers need to ’seize the day’.
New home buyers can make the possibility of owning a home more realistic, as well as getting the best value for their housing dollar, by:
- Looking past the detached home: Apartment living is currently far more affordable
- Pay no attention to bubble talk: In a situation where there is expected to be a shortfall in housing for the next ten years at least, there is no point trying to guess at the existence or non-existence of bubbles. Get solid investment advice, and follow it at a time that makes financial sense for you.
- Get smart about mortgage repayments: Professional Partners has an innovative systems (debt watchers) to help homeowners cut down mortgage debt and own their home in as little as a half of the time. This advantage is especially valuable in the current climate.
Affordability is admittedly terrible – but within Melbourne and across Australia, we are all in the same boat. The best approach is to make financial decisions at a time when they are sensible for your particular situation … and stop listening to those that claim to have a crystal ball!