Houses will never be affordable - RBA

AUSTRALIANS should resign themselves to the fact that housing will never be affordable, a housing report from the Reserve Bank says.

House sale sign /File

Houses will never be affordable - RBA

AUSTRALIANS should resign themselves to the fact that housing will never be affordable, a housing report from the Reserve Bank says.

The report makes grim reading for struggling homeowners and those looking at buying their first home, despite the central bank choosing to sit tight on an interest rate hike this month. 

The report said “it is no doubt the case that housing will never be as ‘affordable’ as we might like, and the cost of housing has been the subject of concern for at least several decades”.

Although the RBA yesterday opted to keep the official cash rate unchanged, at 7.25 per cent it is still at a 12-year high. Official inflation figures due out later this month are expected to hit close to 4 per cent – outside the RBA’s 2-3 per cent target range - putting further pressure on the central bank to raise rates further.

A mixed blessing?

The increase in housing prices had been "a mixed blessing" for Australians, the RBA said.

"At one level, rising housing prices have made many people feel wealthier and have contributed to higher levels of consumer spending than might otherwise have occurred.

"But they have also resulted in concerns about housing affordability."

The RBA said standard accessibility measures are driven by housing prices, household incomes and mortgage interest rates.

Proximity a problem

It’s a bleak picture for those who live within five kilometres of city centres, with house prices about 2 basis points higher than for those at the edge of cities, the report found. Adelaide was an exception, where the difference was smaller.

And it’s not any easier if you’re renting. Renters will be worse off when housing prices rise, according to the RBA.

“Younger people who have not yet bought homes will be hurt by higher housing prices.”

"Renters will be worse off when housing prices rise, whereas those who own rental property will be better off," the report said.

Rents are at record highs, with vacancy rates below 2 per cent across the country, and virtually zero in Sydney.

Governments can do more

The RBA said governments had an important role to play in making housing more affordable.

“In particular, policy initiatives to address any structural factors that encourage excessive demand for housing … will reduce ‘average’ house prices over future cycles and could provide enduring affordability benefits to both home buyers and renters.”

“It is now widely accepted that policies that simply give people more money to spend on housing are likely to be capitalised into higher housing prices.”

The RBA said to improve housing affordability, governments should be focused on policies on land use and improving efficiency in the supply of land and housing.