Housing affordability concerns reach new high

Concerns about housing affordability have risen to their highest-ever level in the latest ANZ/Property Council Survey, with respondents saying soaring prices and increasingly unequal access to home ownership make it the number one issue for governments to address.

Housing supply and affordability overtook cities and infrastructure delivery in June as the most critical issue for the federal government and in December survey the issue reached a new peak, with a record 27 per cent of respondents naming the issue as the biggest problem.

“Clearly there are lots of people who are shut out of the housing market and the wealth creation that that offers,” ANZ senior economist Felicity Emmett said.

“This is an issue around equity and intergenerational equity. We’ve just had a federal inquiry into housing affordability and supply; we have had a number of inquiries over the past 20 years, but there don’t seem to have been concrete measures to come out of these enquiries.”

Deepening concern about affordability came with a broad-based pick-up in sentiment. The headline confidence index jumped further above the neutral 100-level to 142 from 135 at the last survey in September, buoyed by positive sentiment about forward work, increases in staffing and expectations of a strengthening economy.

“This industry is set and ready to go,” said Property Council chief executive Ken Morrison.

Capital growth expectations for commercial office assets improved – becoming less negative in NSW and Victoria, and turning positive in Queensland, WA, SA and ACT – even as more people said the office sector would be affected by the pandemic.

“There is still big discussion about what is the new normal, but in terms of the underlying fundamental economics, the industry has made up its mind,” Mr Morrison said.

“The weight of capital, transaction activity in office has been very strong and we are seeing a number of property companies advancing plans for new construction of offices as well.”

Expectations of higher borrowing costs over the next year surged to their highest level in the history of the survey, which began in 2011 – reflecting the current situation in which markets are pricing in 86 basis points of RBA cash rate hikes over 2022. Sentiment around availability of debt finance also worsened.

Mr Morrison said the sentiment about housing affordability showed the industry was concerned that solutions available – such as faster release of land for development and planning reforms – were not being addressed.

“For the industry, looking at housing affordability, they see the reality of housing price growth and understand the pain,” Mr Morrison said.

“But they also see the lack of action on land supply and planning changes. It’s a societal problem that’s not being addressed adequately. They can see some solutions to this not being addressed.”

The Property Council has long opposed changes to the negative gearing and capital gains tax deductions that benefit property investors, and which the opposition Labor Party promised to reform ahead of the last federal election in 2019.

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