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Australia's Housing Crisis: The Contributing Factors.

The Great Australian Dream of the three bedroom home on a quarter acre block was part of the Workingman’s Paradise in the Lucky Country. The kids and the dog running around in the backyard, playing under the sprinkler, while Mum hung out the washing on the Hills Hoist and Dad sparked up the barbie with a cold tinny in hand. Darryl Kerrigan summed up this dream in the iconic movie The Castle

“It’s not a house, it’s a home, a man’s home is his castle.” 

The Contributing Factors.

Fifty years ago this described the country. In the 1970s Australia had one of the highest levels of home ownership in the world and an unskilled worker in a factory could afford to buy a family home. More than 80% of Australians born just after WW2 owned homes by the time they retired. Between the mid 1950s and the mid 1970s, home ownership in Australia grew from just over 50% to over 70%.

 

So why is it that people in skilled professional occupations can no longer afford to buy a one-bedroom apartment, while the majority of other workers are finding it almost impossible to afford to rent near their employment? How did housing become so expensive?

 

The main answer is neoliberal government policy which turned the housing industry over to privatization; policy that only forced up prices. We have explored the policies of the Governments over the last three decades in another blog here. Past government policy set up conditions that could be used to provide a larger return on residential property, on either sales or rentals.

 

Negative gearing didn’t do what it was initially designed to do; provide more new rental housing. Instead it favoured investment properties which helped push prices up and cost the taxpayer billions every year. While the first home buyers policies were designed to help people into their own home, it had the effect of pricing those people out of the market. Investors found loopholes in those policies that could be exploited for further gain. 

 

Australia is not unique in this challenge, it is a global phenomenon. While we share some of the same international causes, Australia does have unique conditions that are worth exploring.

1. Climate

Australia has always been a country “of drought and flooding rains” as Dorothea Mackellar wrote back in 1906. Bushfires are a part of our reality, so much so that we call certain parts of the year Bushfire Season depending on the location in the country. 

 

Since 2019 Australia has been especially badly hit by fires and floods, losing thousands of homes in the process. People who lost their homes in 2019 bushfires are still not housed. The fires continued into 2020, and then in 2021 the floods began. This year alone, Lismore had flooded four times by October. The flood in February was the highest on record and the one in March was the fifth highest. 

 

All of these natural disasters have reduced Australia’s housing stock by thousands, and rebuilding is slow. Sadly some rebuilding efforts have also been damaged by subsequent fires or floods. So these record breaking national disasters of the last four years have also taken their toll on the available housing stock, especially in regional areas.

Contributing factors to the housing crisis

2. Airbnb and Short Term Rentals

Australia has more than 100 thousand AirBnB listings, and 85% of them are entire homes. Another platform offers over 250, 000 short term rentals for 12 providers. This represents around 150 thousand less homes and apartments available for the rental market. The problem is especially acute in regional holiday towns.

3. Landbanking

Developers like to blame local and state government planning laws for the lack of affordable housing when in fact, they have nothing to do with it. The lack of land release is not because governments are sitting on the land, but the developers are instead. It is called landbanking. Holding newly zoned residential land pushes up the prices and developers make more profit. This is one area that Fitzgerald Housing is looking closely at to try to find a solution and keep down home prices. 

4. Cost of construction

Building materials have become scarce due to the loss of good traffic during the covid pandemic and shipping has not yet picked up to its former rate. Ironically it is our natural resources that have to be shipped offshore to be made into building materials now due to the closure of Australia’s manufacturing industries. This lack is preventing homes destroyed in the 2019 fires being rebuilt, and we have lost so many more homes since then. Finding innovative ways to build homes using recycled materials is another area Fitzgerald Housing is investigating.

5. Baby Boomers residential investments

The long boom after the Second World War lasted until well into the 1970s, and the beneficiaries were the generations born after the Great Depression and up to the early 1960s. Homes were affordable and the high rates of home ownership among those generations attest to this. Once there is enough equity built up in the family home, many Boomers, especially, dabbled in residential property investment. Unfortunately, for their kids and grandkids, the property market is now priced out of their reach. Also the Baby Boomers are staying in their family homes for decades after their children have left and this ties up family homes.

6. Holiday homes

While a large proportion of holiday homes are now also part of the short term rental, AirBnB market, many are still left empty for most of the year. They make up a part of the 1 million empty dwellings found in the 2016 census. They contribute to the significant number of homes that are not available for rent or sale at affordable rates.

7. Property Investment Advice.

Property investment advisors are only interested in the highest possible return on investments. They will actively discourage people from investing in affordable housing and advise getting as much rent as possible. All this does is provide high end residential rental properties out of the reach of most Australian families. So rather than adding to the available rental stock, it actually pushes up prices. This means a greater return for the investor.

 

Now while this strategy looks good on paper, it doesn’t take into account the fact that if the property is vacant, there is no return at all. The investor is also responsible to pay for all repairs and maintenance on the property. When they go to sell the property they will be slugged with high capital gains tax, plus there is the cost of insurance, rates and land tax etc. The home may also need a great deal of work to bring it back to being market ready.

 

Fitzgerald Housing’s investment strategy is different, and may well provide a much better return over the long term. Our properties are 25% below market value with investment terms of 5, 10 or 15 years. The rent is paid whether the property is occupied or not, and this too offsets the lower rental return. In fact, this alone makes our investment properties a much safer bet than a private rental investment as even a few weeks without a tenant adds up to a large sum. Higher rents do not necessarily guarantee a better investment.

 

Also we take care of the property throughout the term, all repairs and maintenance are looked after, our investors don’t have to worry about anything. At the end of the term, we bring the property back to as new condition prior to returning it to the investor. Then if the investor decides to sell, there is up to 60% off capital gains tax! In the end, a private rental investment property may not return as much as an affordable rental property through Fitzgerald Housing.

 

So talk to us today about securing your financial future and providing a safe, secure home for an Aussie family. Let’s get together and revive the Great Australian Dream of a happy, safe family home, where the kids can play backyard cricket with the dog, just like we used to. Because with the housing crisis growing worse by the day, future generations will never experience the care-free childhoods we had and that’s such a sad thought. But it doesn’t have to be that way, we at Fitzgerald Housing are determined to bring back that dream, and it can be done with your cooperation. Give us a call today for a win-win solution to the housing crisis. 

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