Man’s blistering description of the housing market in two words

One of Australia’s top economists has described housing in Australia as a “misery machine” and a “terrible experiment” that has failed.

The typical middle market home in Sydney, Melbourne and Brisbane is now beyond the reach of an average full-time income earner and even those on low six-figure salaries.

Economist Chris Richardson told ABC’s Q+A program that house prices were hitting record highs despite the Reserve Bank’s 13 rate hikes in 18 months, due to rapid population growth.

“For 40 years we have turned housing in Australia into a misery machine and this is a stunning national failure,” he said on Monday night.

“We had a terrible experiment last year where interest rates skyrocketed and yet house prices rose.”

Mr Richardson, who has previously worked at the Treasury and the International Monetary Fund, said the answer to unaffordable housing is to reduce immigration and allow more new construction projects rather than raising interest rates in a attempt to delay demand.

‘I used to think that interest rates would be the solution. They won’t do that. We have to build,” he said.

‘How do we build? We need the builders, but what we need more than anything – for forty years we haven’t had in my backyard, council after council, by council decision, neighborhood after neighborhood, and after 40 years we haven’t built and if we We do build it, we attach all these conditions to it that make it incredibly expensive.

“I would prefer not to talk about migration, but we have screwed this up so badly as a nation that we have to temporarily look at migration as part of this equation.”

Only 168,231 private homes were built during the last financial year, with 27,213 completed by June 2023, an 11 per cent drop from 30,685 in March 2022, Australian Bureau of Statistics figures show.

At an average of 2.5 people per home in Australia, the 420,578 people they would theoretically house were well below the annual population growth of 563,200 in March, which included both net overseas migration and births minus deaths.

More than 400,000 net migrants arrive in Australia in a year, with economists expecting the number of migrants to surpass 500,000 by the end of 2023, setting a new annual record.

Rather than reducing immigration to more manageable levels, Prime Minister Anthony Albanese in August announced a plan for Australia to build 1.2 million “new, well-located homes” over five years, starting on July 1, 2024 .

Only 168,231 private homes were built during the last financial year, while annual net immigration levels exceeded 400,000 (pictured are houses in Oran Park in Sydney’s far south west)

The target was set by the National Cabinet, made up mainly of Labor Prime Ministers, which put pressure on states to change planning laws that give local councils the power to halt high-rise apartment development to appease existing homeowners.

The closest Australia came was over five years, building 1.05 million homes between 2015 and 2020, but Chinese capital in residential unit development has since evaporated.

The average house price in Sydney has risen 12.1 per cent since January to $1.397 million, CoreLogic data for October shows.

This was despite the Reserve Bank raising interest rates at the most dramatic pace since 1989 to combat high inflation.

A borrower with a 20 percent down payment and a $1.118 million mortgage would need to earn $186,251 to avoid falling into mortgage stress, owing the bank more than six times his salary.

Cash rates are now at a 12-year high of 4.35 percent, after last rising in November, bringing variable mortgage rates closer to 7 percent.

Tenants are also having a hard time with the national vacancy rate of just one percent in October, according to figures from SQM Research.

Renters are also struggling with the national vacancy rate of just one per cent in October, according to figures from SQM Research (pictured shows a rental queue at Bondi in Sydney)

House renters in Melbourne and Perth have seen their weekly rent rise by 19 per cent in the past year, as an influx of international students and knowledge migrants compete for rental properties.

Mr Richardson suggested limiting the influx of international students to ease the housing shortage, which is particularly pronounced in Sydney, where the average weekly house rent is now $1,012.

“We now have 725,000 students from the rest of the world studying in Australia – up from 555,000 a year ago,” he said.

‘We sell education to the world and a lot of it we do well and some of it we don’t do so well, but it’s a big part of the increase in pressure at the moment and it’s a relatively concentrated part where we can change something.’

In September 2023, 45,090 international students arrived in Australia, an increase of 26.8 percent or 9,540 from the same month a year earlier.