Jul 05

Housing affordability: What Australia can learn from the rest of the world

Australia is not alone in its housing affordability crisis.

A global snapshot shows many governments are confronting booming property prices, putting pressure on low to moderate income earners.

Governments have tackled the problem with strategies as varied as finance for non-profit housing, local councils buying up private property to turn it into social housing, to easing demand through tenant protections that makes long-term leasing appealing.

But closer to home, a Monopoly-like approach to the buying and selling of real estate – like the boardgame motto “own it all” – is fuelling to price hikes, an expert says.

Property prices are on average five-and-a-half times household incomes.

And Australia’s apartment boom is not supplying the right type of housing to stablise prices or satisfy need, according to property analysts.

Tax incentives for local investors and international appetite is creating an “infinite demand” for Australian real estate, according to urban geographer Dr Kate Shaw.

Dr Shaw, from the University of Melbourne, said housing in Australia is seen as a tradeable commodity – an alternative to the stock market.

“Speculative property investment – this is a national pastime, this game of Monopoly in which more than one in seven taxpayers in Australia are negatively gearing their investment properties and recieving concessions on capital gain tax,” Dr Shaw said.

“This is creating extraordinary churn. We are buying, selling, demolishing, rebuilding, selling, buying more than ever before, and this is pushing up prices.”

Dr Shaw said much of the new housing being built, such as high-end apartment construction is not meeting the main area need, which is for low to moderately priced housing.

“In the last 15 years we have seen a dramatic increase in the supply of housing in the inner cities of Melbourne and Sydney and, demonstrably no reduction in sale prices or rents in housing in the middle and outer suburbs,” she said.

“And yet this mantra keeps getting pushed – that we need to build more housing to bring down prices. The success of this strategy depends entirely on the kind of housing we are building.

“When you combine the incentives for local investors to invest in Australian property, with the increasing attractiveness of Australian property to an increasingly nervous global investor market, we have what amounts to an infinite level of demand, meaning, prices will continue to be pushed up. And the housing product we are building is tailored to that investor market.

“The more we build, the more they will come – in the short term.”

New Zealand-based researcher Hugh Pavletich, co-author of the annual Demographia international housing affordability survey, said Australia should look to development and planning policies in middle North America – particularly Texas, with its similar population size, and energy and resource sector.

“We know housing should not really exceed, in normal markets, three times household incomes,” Pavletich said.

“Australia and New Zealand are part of the new world and we should be learning lessons from other jurisdictions in the new world where there are still normal housing markets.

“The key things the Texans do right is that they do not allow local authorities to mess around with land supply, by law, and they are required to finance infrastructure properly out on the bond market.

“Those key factors are what we should be learning from, and adopting and adapting to suit our local conditions in Australia and New Zealand, so that over time, we can restore our housing markets to where it was – roughly three times household incomes.”

Australia is not alone in its housing affordability crisis.

Governments around the world have introduced policies or strategies to combat rising house prices that affect low to middle income earners.


Australians covet home ownership – “the great Australian dream” is in our DNA. Treasurer Joe Hockey’s advice to first home buyers is to get a “good job” that pays well. Top  economists expect prices to surge again before they plateau. The Victorian government is reviewing a proposal to introduce five to 10 year rental leases, akin to some cities in Europe.


The Swiss were able to cool their sizzling market without raising interest rates. Harsher home ownership rules were brought in, including limiting access to retirement funds as deposits and shortened mortgage repayment periods, which it was hoped would put a lid on debt growth. Housing in Switzerland is less vulnerable to volatility like severe prices rises because only 40 per cent of the population own property.

Singapore The Singapore government has a publicly sponsored housing construction program, which sells units and condos to consumers, targeting the lower-middle income group. Buyers can resell, subject to some rules around timing. This strategy of reacting to demand and releasing housing when needed is seen to help quell price rises. Foreign ownership is also restricted. Property prices have gone down.


The urban containment philosophy – to manage urban sprawl and create greenbelts of open land around cities – has often been blamed as a reason for rocketing real estate prices. Limited availability of land for development increases demand on existing housing supply. The government has brought in mortgage lending limits – the first policy of its kind in Britain in decades.


Home ownership is not as sought after or romanticised in Germany as it is in Australia. Germany has one of the lowest home ownership rates in Europe, about 40 per cent, and comparably stable house prices. It’s attributed to liberal release of land and secure tenancies for renters, which makes never owning a home an appealing prospect. Unlimited tenures – which offer security – are not out the ordinary.

Hong Kong

Property price growth has tracked at 170 per cent since 2008, which made Hong Kong one of the most costly cities in the world for home ownership. Here, it is not unusual for middle income earners to struggle to afford a flat. The government has periodically introduced new taxes to discourage foreign ownership, including an extra 15 per cent stamp duty for non-permanent residents.


The government is looking into solutions to tackle housing affordability. Vancouver is viewed as a global city and foreign property investment, from China to the Middle East, is rife. While foreign ownership is a contentious and murky topic, much as it is in Australia, international investment in Canadian real estate might provide a price correction when the bubble pops, some property experts say.

South Africa

In a country with enormous wealth disparity, the Finance Linked Individual Subsidy Programme (FLISP) helps low to middle income first home buyers, bringing in about AUD$370 to AUD$3500 a month, get on the property ladder. Families can get repayment subsidies of between (R10,000) $1000 to (R87,000) $9000. About R300,000 gets a very basic, single-storey, two or three bedroom house in a Johannesburg suburb.


In Copenhagen late last year, apartment prices hit what local media called near “crisis level”. In the 2015 budget, the government introduced an agreement to give municipal mayors the right to set aside 25 per cent of development for affordable housing. Copenhagen mayor Frank Jensen said he hoped the rule would ensure that “nice neighbourhoods” could be enjoyed by students and “regular workers”, not just the wealthy.

United States

In New York, a 10-year plan is in place to provide or preserve 200,000 affordable homes. Mayor Bill de Blasio has attributed the housing affordability crisis to lack of stock, stagnant wage growth and increasing economic inequality. Low to middle income New Yorkers are targeted, with about 40 per cent of the 200,000 benchmark for building new budget housing, and the balance applying to protecting renters from landlord harassment and rental rises.


Brazilians are facing a chronic real estate shortage, which is driving prices north. Up to a quarter of a million residents of the capital Rio De Janeiro are victims of the housing deficit, squatting or living life in slums. The government’s Minha Casa Minha Vida (My Home My Life) social housing policy was introduced in 2009, with almost 72,000 units finished or under construction. Of that, 35,000 are reserved for low-income families.


The French have sought to shore  up affordable housing in gentrifying areas of Paris. Dubbed “ghettos for the rich”, parts of the capital have become financially out of reach for low to middle income families. The city council – Conseil de Paris – last year released a list of 257 addresses, encompassing 8000 apartments, that it has first right of refusal to buy at market price, so that the apartments can be converted into government-subsidised housing.

United Arab Emirates

Luxury real estate is the staple of the market, but more and more residents – middle income earners – are wanting modestly priced homes nearer their work. According to Bloomberg, about half of those who work in Dubai cannot afford to live there, and commute from neighbouring sheikhdoms. The government is encouraging developers to set aside 15 to 20 per cent of housing for lower income buyers but it’s not enshrined in law.

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