ARE WE AT THE POINT OF NO RETURN ?

ARE WE AT THE POINT OF NO RETURN ?

We all know that the future comes one day at a time. Some however, have grave concerns about the future of the property market, as the only involvement the respective governments have, is the collection of taxes.

The Real Estate Institute of Australia (REIA) recently suggested that the Commonwealth Government seriously consider a Federal Ministerial portfolio for housing to develop a nationwide housing strategy. Today, house prices and rents are escalating yet incomes (excluding those of merchant bankers) are stagnant. The price of a vacant residential lot is at an historic high, which explains why new home construction is in decline. The Land Monitor report showed that the average price of vacant lots in the five major cities, stood at $183,873 in December 2006, which equates to a 7.7 per cent increase compared to December 2005.

The residential population of NSW in 2005 was an estimated 6,804,522. The population of NSW in 2025 is projected to be approximately 7,960,000. The growth of the NSW population is declining. Between 1995 and 2000 the average growth rate was 1.15 per cent. Between 2000 and 2005 the average growth rate was 0.96 per year and it is projected to decline to 0.79 per year between 2005 and 2025. What makes this trend even more alarming is the median price for vacant land around Australia. The median price of a vacant residential lot in Sydney currently stands at $357,500, Melbourne $155,000, Brisbane $175,000 and Adelaide $186,800. Perth increased last year by 122 per cent to record a median price of $349,000.

According to the Organisation for Economic Co-operation and Development (OECD), Australia’s capital cities are now among the least affordable places to live in the world. The Paris-based organisation concluded that Australia had the most over-valued houses in the western world. The study of fifteen countries showed that housing prices were 52 per cent higher than rental prices could justify. The OECD says that the price of housing, relative to incomes, is 50 per cent higher in Australia than other countries studied.

Demographia reported : “The current housing affordability crisis requires a dramatic increase in the stock of affordable housing in Australia. This includes boosting investment in public housing (there are around 30,000 fewer houses in public housing stock in Australia than a decade ago) and introducing innovate financing schemes to support the purchase and retention of affordable housing. An increase in federal budget outlays to the states through the Commonwealth –State Housing Agreement is unlikely under the Howard government given its preference for rental subsidies over investment in public housing. A national commitment to new ways of financing affordable housing in Australia is urgently required.”

I guess what is really needed is for the policy makers to firstly acknowledge that we have a problem. Don’t hold your breath !! Cheers ^__^

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