One of Australia’s top economists has described housing in Australia as a ‘misery machine’ and a ‘terrible experiment’ gone wrong.
The typical, middle-market house in Sydney, Melbourne and Brisbane is now beyond the reach of an average, full-time earner and even those on a low, six-figure salary.
Economist Chris Richardson told ABC’s Q&A program that house prices were reaching record highs, despite the Reserve Bank’s 13 interest rate rises in 18 months, because of rapid population growth.
‘Across 40 years, we have turned housing into a misery machine in Australia and this is a stunning national fail,’ he said on Monday night.
‘We had a terrible experiment over the past year with interest rates roaring up and yet house prices went up.’
One of Australia’s top economists Chris Richardson has described housing in Australia as a ‘misery machine’ because immigration is too high
Mr Richardson, who has previously worked at Treasury and the International Monetary Fund, said the answer to unaffordable housing was to reduce immigration and allow more high-rise unit developments instead of raising interest rates in a bid to slow demand.
‘I used to think interest rates would do the trick. They won’t. We have to build,’ he said.
‘How do we build? We need the builders but what we need more than anything else – for 40 years, we had not in my backyard, council by council, by council decision, neighbourhood by neighbourhood, and after 40 years, we haven’t built and when we do build, we attach all these conditions which make it incredibly expensive.
‘I would love not to touch migration but we have screwed this up so massively as a nation that we temporarily, need to look at migration as part of this equation.’
During the last financial year, only 168,231 private homes were built, with 27,213 finished in June 2023, an 11 per cent drop from 30,685 in March 2022.
With an average of 2.5 people per home in Australia, the 420,578 people they would theoretically house was well below the annual population increase of 563,200 in March, covering both net overseas migration and births minus deaths.
Rather than cut immigration back to more manageable levels, Prime Minister Anthony Albanese in August announced a plan for Australia to build 1.2million ‘new well-located homes’ over five years, starting on July 1, 2024.
During the last financial year, only 168,231 private homes were built, as annual net immigration levels surpassed 400,000 (pictured are houses at Oran Park in Sydney’s outer south-west)
The target was set by the National Cabinet of mainly Labor premiers, putting pressure on states to change planning laws that give local councils the power to stop high-rise apartment developments at the behest of existing homeowners.
The closest Australia came over a five-year period was building 1.05million homes between 2015 and 2020.
Sydney’s median house prices has surged by 12.1 per cent since January to $1.397million, despite the Reserve Bank hiking rates at the most dramatic pace since 1989.
A borrower with a 20 per cent deposit and a $1.118million mortgage would need to earn $186,251 to avoid being in mortgage stress, where they owed the bank more than six times their salary.
The cash rate is now at a 12-year high of 4.35 per cent, leading to variable mortgage rates creeping closer to 7 per cent.