As housing prices in Australia continue to skyrocket, many people are left wondering if there will be a housing crisis in 2023. A combination of various factors put immense pressure on the Australian housing market, making the possibility of a housing crisis increasingly likely. Let’s explore these factors and see how they can contribute to a possible crisis.
What affects the housing market?
The following are factors that affect the Australian housing market:
Despite efforts from the federal government to address housing affordability, property prices continue to surge, pricing many potential home buyers out of the market. The massive increase in the price of houses in the market has affected both old and new buyers, as well as renters.
Consequently, there is an increase in reliance on rental properties, causing high rental stress for low-income earners who struggle to afford housing in Australia’s capital cities.
The Reserve Bank of Australia plays a crucial role in setting interest rates, which directly impact housing affordability. With the cash rate increasing, this could further exacerbate the affordability issue and increase the risk of mortgage defaults.
This is because property owners tend to increase rental prices and other fees to cover the cost of the rising interest rates. This, in turn, affects the housing market, for the renter and buyer alike.
Decade high construction costs, which has negatively impacted the housing supply and contributed to the rising property prices. Not only does this slow construction projects but also leads to increased house prices.
Additionally, bad weather conditions have caused delays in construction projects, further limiting the availability of affordable housing. This may linger for some time to come, which contributes to the crisis.
The Australian government has implemented various initiatives to improve housing affordability, such as grants and schemes for first-home buyers.
However, policies like negative gearing have contributed to the increase in the property market, pushing up property prices and making it more difficult for people to enter the market. As a result, it looks and feels as if the initiatives do not have any impact on the housing market in the country.
With the return of overseas migration, there has been a rapid increase in demand for housing, particularly in regional areas where housing pressures are growing.
More people are becoming aware of affordable housing in these areas, and the pressure is mounting almost as much as it is in big cities. This has further exacerbated the issue of housing affordability and supply.
Social and public housing
Social and public housing play a vital role in providing affordable housing options for those in need. However, the current state of social and public housing in Australia is insufficient to meet the growing demand, contributing to the potential housing crisis. This will further drive the need for more houses and create a negative impact in the long run.
Assessing the likelihood of a housing crisis in 2023
Housing supply and demand
With the housing supply struggling to meet the growing demand, property prices in capital cities are expected to continue rising. This could make it increasingly difficult for many Australians to afford housing, leading to a potential housing market crash. Also, more people will turn to regional areas and this may cause an increase in property prices and rent.
Not everyone has the financial resources to buy houses or apartments. A majority are more comfortable renting. As a result, the already tight rental market will become too pressured and unable to sustain the demand. This has led to higher rental prices and growing rental stress for those unable to afford a home.
Homeownership and homelessness
With the increase in housing costs, homeownership rates are expected to decline. The reason behind this is that more people will sell their properties because of an inability to cover the additional costs of running them.
This, coupled with the growing number of Australians experiencing homelessness, indicates that a housing crisis in 2023 is a real possibility.
More insight on the housing crisis
Will Gold Coast house prices drop?
It is impossible to say for sure whether or not Gold Coast house prices will drop. However, there are a number of factors that could lead to a decline in prices, including:
- Rising interest rates
- A slowdown in the economy
- A decline in population growth
- An increase in supply of housing
If any of these factors occur, it is likely that Gold Coast house prices will come under pressure. However, it is also possible that prices will continue to rise, or even plateau. Ultimately, the future of Gold Coast house prices is uncertain.
How can the Australian government address the housing affordability issue?
The government can invest in affordable housing projects, review taxation policies such as negative gearing, and support first-home buyers through grants and schemes.
What are some potential solutions to Australia’s housing crisis?
Some potential solutions include increasing the supply of affordable housing, addressing construction costs and delays, and implementing policies that promote homeownership.
How do rising interest rates contribute to a housing crisis?
Rising interest rates from the reserve bank can lead to higher mortgage repayments, making it more difficult for potential buyers to afford housing and increasing the risk of mortgage defaults.