Last year when the Covid-19 pandemic first hit, Australia locked its international borders to protect its citizens. The economy has since suffered, and the housing sector worsened.
Population growth typically leads to an increase in house prices, but now we have seen that even though there has been little to no population growth, prices for real estate are booming. Despite lockdowns, job loss and recession, national housing values increased by 1.5% in the month of August 2021.
This shows that prices are less affected by supply and demand but more so by interest rates. Interest rates are low, at 0.1%. Although at the moment even if interest rates were hiked up to reduce house prices, the Australian working landscape cannot afford a property during these difficult times.
A bigger picture is the fact that housing is used as an investment and those who own a property don’t want to see the growth of property prices slow. However, if a property’s valuation is up and no one can afford it, is there any real value? Unfortunately, no government wants to be responsible for the slowing of the growth of household wealth. Anyone born after 1980 is a generation looking at rising property prices, out of their reach.
It is important to combat wealth inequality and one of the ways is with a lot more community and affordable housing. There is a fund to create social, affordable housing. Taxation of savings and accumulated wealth alongside public housing may help combat Australia’s property crisis. It is important that permanent housing and home ownership is not out of reach for a whole generation of people.
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