The RBA says it wants to see wages rise before lifting the official cash rate but house prices could rise 10 times as fast as them in 2021 according to some forecasts.
Unfortunately, despite their good intentions, government grants and tax incentives to help buyers and investors into the market could have the opposite effect and actually make it harder for some to buy.
The problem governments have in trying to get the 100,000 first-home buyers on average every year is that millions of existing property owners don’t want to see the value of their dwelling fall at the same time.
Wages have been stubbornly slow to rise for a lengthy period now, and AMP Capital’s Shane Oliver says the annual growth rate of 1.5 per cent doesn’t touch the sides for property hopefuls.
“It hardly makes any difference,” he told Domain.
“House prices are up 8 per cent already this year based on CoreLogic numbers. There’s another 2 per cent coming in May alone.
“As this year settles down, we’re going to see house price growth at 15 or 20 per cent in some cities.”
With this year’s property boom, house price growth could beat wage growth ten times over, making things worse off for the those at the lower-to-middle end of the market.
“If you’re in hospitality, food services and accommodation, you might have got an increase, but you’re still on the minimum wage on which most people can’t get in to property ownership,” Mr Oliver said.
“It doesn’t really help, affordability is getting worse.”
The gap between cost of housing and household income is nothing new – it has been growing for years.
Governments however, have found it hard to do anything to arrest the trend. CoreLogic’s Tim Lawless spoke to Domain.
“It’s understandable that policymakers would be reluctant to implement policies that could place housing values under downward pressure,” Mr Lawless said.
“A reversal in home values could see households spending less as the wealth effect moved into reverse, weighing on economic growth.”
Independent economist Saul Eslake said the figures don’t lie when it came to the odds being stacked against politicians trying improve housing affordability.
“There are a lot more votes to be had from the 11 million or so people who already own at least one property (to say nothing of the 2 million or more who own at least two) than there are from the people who in any given year have a realistic chance of becoming property owners for the first time,” Mr Eslake said.
The reality is political support for housing affordability will struggle to get full support while so many Australians live in a home they own.
