Housing: supply, demand and affordability

In 1981 homeownership rates for young households (25 to 34 years old) were about 60 per cent - regardless of income. For young households today, owning a house is very income dependent. 

"The balance has shifted and gone beyond the tipping point.” - Pisarki

Housing affordability is an vital issue at ANZ, so we sat down with two experts to discuss what’s changed and what can be done to rebalance the scales.

Beyond the tipping point

For National Shelter EO, Adrian Pisarski, housing affordability is a relative term: “People conflate the term housing affordability with affordable housing and they are two very different things.”

Pisarski explains the most significant change in recent times is the number of people who own outright compared with people who have a mortgage.

“That balance has shifted and gone beyond the tipping point. We always used to have more people who owned outright than who had a mortgage but it's now the other way around,” he says.

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However as home ownership levels drop, the rental market inflates and this has implications for people on a low income.

“The rental market is chock full of people who are frustrated would be homeowners,” Pisarski says. “There is virtually no affordable rental for the bottom 40 per cent of household incomes in Australia in any of our capital cities.

“The effect of that means that they displace lower income households from low cost housing and ultimately that results in an increase in homelessness,” he says.

Where I live

Meanwhile, Grattan Institute CEO John Daley says simply referring to housing affordability as what percentage of your income is being spent on housing is “perhaps the worst way of thinking about it” - because the scale keeps moving.

“If you're on a low income, housing has increased from costing about 24 per cent of your income to 28 per cent and home ownership rates are down to about 22 per cent,” he explains. 

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Daley argues housing affordability depends on the balance between supply and demand and the fundamental way to address this is to build more housing.

“We are now at record levels of increased housing in Melbourne and Sydney but we are also at record levels of increased demand,” he says.

“If we want our children to be able to afford to buy a house and if we want to be able to downsize when we're 75 into the suburb where we live we are going to need to accept that there will be more development in the suburb where we live not in the suburb next door to our suburb.”

Watch the videos above to hear more of Adrian and John’s conversations.

Graham Hodges is Deputy CEO at ANZ & Caryn Kakas is Tribe Lead, Housing at ANZ.