Analysis of the Housing Affordability Crisis in New South Wales

This report provides a comprehensive analysis of the housing affordability crisis in New South Wales (NSW), focusing on the relationship between household incomes and housing expenditure, including mortgage payments and rents. It highlights the significant decline in housing affordability in Australia since 1980, with a particular emphasis on the worsening situation in NSW, where the ratio of median house prices to average disposable household income has surged. The report explores the drivers behind the crisis, such as low interest rates and low supply, and discusses the impact on various sectors, including emergency workers, teachers, and nurses. It examines the house price-to-income ratio as a key indicator of affordability, and critiques arguments that suggest the Australian property market is becoming affordable. The report concludes by suggesting recommendations, including macro-prudential measures to tighten lending standards and policies to boost new housing supply and enhance existing house stocks. The report includes references to relevant research and studies on housing affordability.

HOUSING AFFORDABILITY
CRISIS IN NEW SOUTH
WALES

INTRODUCTION
 Housing affordability signifies the
relationship between household incomes
and expenditure on housing such as
mortgage payments, rents and prices.
 The term housing affordability is not the
same as the term affordable housing which
is in relation to social and low income
housing.
 There has been a significant decline in the
housing affordability in Australia since the
year 1980.

Introduction
 A 78% increase has been depicted through the “price to
income ratio index” provided by OECD between the year
1980 and 2015
 The problem is even more acute in NSW in relation to
which it has been indicated by the Parliamentary Library
calculations that the ratio of median house prices to
average disposable household income has become more
than 7 in 2015 which was only 3.3 in 1981

The problem of housing
affordability crisis
 The expensive housing market of Sydney
has forced emergency worker, teachers
and nurses to leave the city and live in
cupboards which have put the hospitals
and schools at a staff shortage
 People having low income are not able to
afford a house in Sydney’s inner-city
suburbs.

House price to Income ratio
 The price to income ratio is a
fundamental housing affordability
indicator in a specific location.
 This is the ratio between median family
disposable incomes to median house
prices which is expressed in from of a
percentage or in form of year of income.
 Sometimes the ratio is compiled
separately for termed attainability and
first-time buyers.

House price to Income ratio
 It is an established fact the price of
properties in Australia is among the
highest in the world.
 However the arguments which have been
provided that the property market in
Australia is becoming affordable have
been rejected evidently by various
experts on the issue.
 ive biggest cities in Australia have
"severely unaffordable" market in relation
to housing.

House price to Income ratio
 Other figures have also suggested that
housing is not affordable in Sydney.
 All the major markets in Australia which
have a urban-containment policy have
been subjected to severely affordable
housing.
 It has been further argued that all markets
which have a severely unaffordable
housing have an urban commitment and
restrictive land use regulation police

House price to Income ratio
 There have been suggestions provided
based on the economic concept of
demand and supply that the increase in
supply will ensure that the price of
housing in Australia is decreased due to
the decrease in demand
 It is not as easily done as said because it
is difficult to manage the demand in
relation to housing in Australia.

House price to Income ratio
 Reduction of price in relation to the
property market in Sydney which had
been depicted in the late 2015 with
respect to the macro prudential
tightening provided by the Australian
Prudential Regulation Authority (APRA)
can evidently be stated as ephemeral
 There has been a significant
reacceleration in relation to price gains
and auction clearance rates

The reason for Australia being so expensive
 There have been primarily two drivers in
relation to the growth of Australian home
prices
 The first of these drivers are the change
form high to low interest rates which has
enhanced the scope of borrowing and
bargaining power.
 The second reason has been that of low
supply with respect to the high demand

Growth in income and growth in housing prices
 Low income Australian is subjected to
significant detriment with respect to
owning a property in Australia.
 The purchase of a house in Australia is
one of the most significant financial
decisions which are made by households
in Australia.
 The property is one of the most valuable
assets owned by the citizens.

Conclusion
 Thus form the above discussion it can be
concluded that there is a significant problem
in relation to housing affordability in Australia
and specifically NSW and Sydney.
 The expensive housing market of Sydney has
forced emergency worker, teachers and
nurses to leave the city and live in cupboards
which have put the hospitals and schools at a
staff shortage.
 People having low income are not able to
afford a house in Sydney’s inner-city suburbs.