The great Australian dream of home ownership seems to be disappearing before our very eyes. Australia is in the midst of its worst housing crisis in decades, the Reserve Bank statistics show that house prices were flat in the first three months of this year and they appear to be headed for a fall. Credit has dried up over the March quarter with lenders reluctant to offer finance.
This has depressed investment in new housing and new home sales have slumped. The rental market is tight and a shortage of supply is forcing rental prices upwards. Those on lower incomes are faring the worst with public housing funding decreasing while population has increased over the last decade. What a picture of gloom for those aspiring to enter the market at this time.
Purchasing a property in Sydney has become nearly impossible even though the prices of homes in the west and south west have been declining. Young people wanting to buy into the market face long queues and disappointment at auctions as they trawl through property guides and real estate offices. The statistics for areas on the fringes of the capitals show high numbers of defaults on mortgages resulting in sales of properties at prices below the original mortgage price, leaving sellers with ongoing debt.
Additionally the dearth of rental properties has led to skyrocketing rental prices with intending renters locked in bidding wars against each other to win a rental property. In spite of these increases the return on investment for investment properties has declined along with the decline in housing prices. This is a real catch 22. More landlords are choosing to increase rents, forcing people out of the rental market to move back with family just to survive, as the market is at near full occupancy.
Add to this picture the increasing numbers of people who face having to work past retirement age to pay off mortgages that they still have, and this paints a bleak picture of living in Australia today. The option of a sea or tree change is no longer a viable. Development on the coastal fringes is even putting pressure on locals as they are being priced out of their own localities.
Of course these difficulties are not spread equally through all socio-economic strata. In wealthier suburbs house prices have risen substantially over the last decade. However, even here the trends show some softening of prices over the last quarter.
Even if older Australians would like to downsize to make way for the young, the rise in building costs means a the smaller new apartment will cost them nearly the same price. So, with nothing left over, there is no incentive for them to downsize to a higher-density lifestyle.
The great Australian dream of a house with land may, of necessity, be over. Australia remains one of the few countries which has such high levels of low density living. Perhaps Australians will have to adapt to patterns of living more like those of other large cities where high density living and renting for life is the norm. With petrol prices forcing more people into public transport higher density living may be the only way out of the housing shortfall. Whether we are ready for such change is the question. A sense of insecurity remains about renting for life. The perceived lack of stability remains a stumbling block to a change of this kind, but is there a choice as land is becoming scarcer.
Can we make the psychological shift to this new way of living? The iconic image of ‘the land’ is still seared into the imaginations of Australians and the yearning for the quarter acre block harks back to this ideal of space and freedom. Yet is this model for living sustainable into an uncertain future? The backyard barbie, the hills hoist and the veggie patch may have to make way for new ways of living in our major cities.