Buying a house in Australia continues to be a dream yet to turn true as house prices are rocketing sky high along due to a shortage of supply.
There are no signs of easing of housing affordability crisis in the kangaroo country as only a marginal increase in home sales has been witnessed in October 2007. A 0.8% increase has been seen in new home sales and units for October 2007. A fall of 1.6% to down 2% has been observed in detached home sales over the last three months to October 2007, as per The Housing Industry Association's (HIA), according to news published by SMH.
Towering house prices along with a shortage of supply have provoked homebuyers to move to the rental market, resulting in a record low vacancy rates. Vacancy rates are already going through a 27-year low of 1.4% and decreasing drastically to 1%, putting the pressure on smaller income groups who are forced to pay increased rents.
Growing immigration and two more interest rate hikes by May 2007 has affected the Australian housing market so badly that it couldn’t reestablish itself. The increase in mortgages has brought down the number of loan holders, forcing more people to live on rented accommodation. This is assisting in escalating the secondary income of people who posses their own homes as they can now charge high rent.
Westpac Banking Corporation expected a rise of 7.5% in rents by the latter half of 2007. After the Reserve Bank of Australia hiked cash rate from 6.5% to 6.75%, increased mortgage rates pressurized small pockets.
As per Paul Braddick who is ANZ Bank's Head of Financial System Analysis, housing requirement was 180,000 dwellings annually, however, only 150,000 were constructed and the situation can grow worse with a national shortage of around 200,000 by 2010, according to Theage.
As per a Senior Research Analyst at RNCOS, “The drastic increase in interest rate has inflicted a lot of destruction to the Australian housing market that it seems to be impossible to come back. Australia has to someway minimize its interest rate or the government should take initiatives to provide homes to the middle class people at low or at moderate rates. Due to increasing house rentals, the local people in Australia have no other alternative but to lower their disposable income, which in fact is a very dangerous factor as such a thing would affect the economic condition of any country in the world.”
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