Why is Australian housing so expensive and what can be done to improve housing affordability?
Head of Investment Strategy and Economics and Chief Economist, AMP Capital Sydney, Australia
For as long as I can recall housing affordability has been an issue in Australia but since the 1990s it’s gone from being a periodic cyclical concern to a chronic problem. The 20% rise in prices over the last year has put the spotlight on the issue again. With the surge in house prices since the 1990s has come a surge in debt which brings with it the risk of financial instability should something go wrong in the ability of borrowers to service that debt. This note looks at the main issues. Where is the property market now? What’s driving poor affordability? How big is the risk of financial instability? What can be done about both issues? And what’s the outlook for home prices?