“House Prices To Surge Amid Property Shortage Crisis”
Source: Ninemsn, Money
Date: Thursday, 18 March 2010
Author: Stuart Fagg
“Australia must build an additional 500,000 houses by 2020 or face a crippling rise in house prices that will make home ownership out of reach for many.
The Housing Industry Association (HIA), which represents the property development industry, says that unless a skills shortage in the building industry and “onerous” planning regulations are addressed, Australians face a future of high interest rates and unaffordable property.
“If we don’t get a comprehensive supply response to the accumulating housing shortage then the lack of affordable and appropriately located rental properties will only worsen, while pressures on existing home prices will continue at an undesirable rate, placing avoidable upward pressure on interest rates,” said Ben Phillips, senior economist at the HIA.
House prices rose by more than 10 percent last year, and analysts say that further double-digit rises are inevitable unless the shortfall in supply is addressed.
The average Australian house price is now $485,000, which, assuming a 10 percent deposit on a 25 year mortgage, requires a monthly repayment of $3100 at today’s interest rates.
That is well out of reach of most first home buyers, according to Matthew Quinn, CEO of property developer Stockland.
The Reserve Bank of Australia has also flagged its concerns about the shortage of new houses.
Assistant RBA governor Philip Lowe told an urban development conference earlier this month that Australia must devote a larger share of Gross Domestic Product to property construction to increase the supply of new properties.
“If this does not happen, further adjustment in housing prices and rents is likely to occur to balance supply and demand,” he said.
Australia already has the least affordable houses in the world, according to a ranking of international housing markets released in January.
From a total of 23 Australian regions included in Demographia’s Sixth International Housing Affordability Survey, 22 were labelled severely unaffordable and Australia scored the worst housing affordability rating in the world, followed by Canada.
Demographia calculated the ratings by diving median house prices by annual median household income and named Vancouver as the least affordable city in the world.
Sydney was ranked second, with the Sunshine Coast, Darwin and the Gold Coast rounding out the top five.
Melbourne and Wollongong also made the top ten, coming in at eighth and tenth respectively.
In Sydney, nearly 57 percent of the average income is needed to pay the mortgage on the average house.”