A day after the government and the Greens did a deal on the housing Australia future fund (Haff) designed to improve housing affordability, the Bureau of Statistics released the latest housing price data showing that affordability has again taken a dive.
Before we go any further, just consider this about the Australian housing market. In the past three-and-a-half-years we have endured a global pandemic that shut down most sectors of the economy for long periods at a time and since then we have had inflation growth which has seen the Reserve Bank raise the cash rate by 400 basis points – a larger and faster rise than we’ve had for more than 30 years.
On the face of it that should be pretty bad news for the housing market. And yet the latest data from the Bureau of Statistics reveals that in the June quarter this year average property prices rose by 2.8%, having fallen just 0.9% in the past year and after being down as much as 4.6% in the 12 months to March.
Even more stunning is that average residential prices across New South Wales are now $284,000 higher than they were in December 2019 and $261,000 higher in Queensland. And if you live in Tasmania, you are now on average paying 49% more for a dwelling than you were before the pandemic.
All of which is to say that come the nuclear holocaust the only things remaining will be cockroaches and Australians still trying to outbid each other at an auction for a place to live in.
Actually, we can probably assume there will also be Australian politicians doing what they can to bolster house prices come what may.
The signs of this improvement in house prices were there in the most recent house lending figures which showed that the amount of money being borrowed for home loans was rising much faster than the actual number of people taking out loans.
As a result, the fall of the market after the RBA rate hikes seems at the moment to be short-lived.
Of course, as with all things financial, past performance is no guarantee of future success, and given we are certainly seeing signs of a slowing economy and slowly rising unemployment, even if prices do not fall, there is unlikely to be another price boom in the next few months.
But for now we can say that the past three years have not been good for housing affordability – either buying a house or, due to increased interest rates, paying the mortgage of one.
The decade of ever more record low interest rates is well behind us now, and my colleague at the Australia Institute, David Richardson, noted that the recent national accounts released last week showed that 6.6% of all household disposable income in Australia was now going towards paying off housing loans:
Households on average are spending a slightly lower share of their income on their mortgage interest than they were in 2008 when interest rates were 130 basis points higher at 9.8% compared with the current standard variable rate of 8.5%, or even back in 1989 when interest rates were double what they are now at the infamous 17%.
We can also use the household disposable income figures to get a sense of the cost in real terms of the average house.
In December 2019, the average dwelling price across Australia was about 17.9 times the average annual household disposable income per capita (which is now $56,150). The massive rate cuts and the homebuilder stimulus sent that soaring to 22.2 times.
Housing became somewhat more affordable due to the rate rises that slowed house prices, but it once again is becoming less affordable – to a level much higher than was the case in 2019, let alone a decade ago.
This all highlights that investing in housing, due to taxation policies and a general political belief that any government, whatever the political stripe, must keep house prices rising, has been a pretty good decision.
It goes to a point my other colleague Richard Denniss has often made – everyone in Australia seems to know investing in the housing market is a good deal except for the Australian government.
Public housing would improve supply for low-income earners who are unlikely to be able to afford a deposit but would benefit from a system in which rent prices are capped relative to inflation and the security of long-term leasing.
But it would also be a good investment for the government – taking an equity stake in a sector of the economy that thus far has come through the three most tumultuous years in living memory with little fuss.
• Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work
