What can be done to Fix Australia’s Housing Crisis?
By Dale Gillham |
The great Australian dream of owning your own home is becoming increasingly challenging for many Australians. Indeed, housing and housing costs have continued to skyrocket over the years with many now asking how we can fix the problem.
The reality of Australia’s current housing crisis
When you investigate why many are struggling to buy a home the statistics don’t lie. According to the ABS, around 66 per cent of Australians own their own home with or without a mortgage but if we dig a little deeper, this has decreased from 71 per cent over the last two decades. At the same time, those renting from a private landlord has increased from 18.4 per cent to 26.2 per cent, while those renting from government agencies has dropped from 5.5 per cent to 2.9 per cent.
Research from the Australian Housing and Urban Research Institute indicates that social housing has dropped from 4.9 per cent of all housing in 1981 to 3.8 per cent in 2021. If we compare this to other countries, Australia sits in 20th position, which is well behind the Netherlands at 29.1 per cent, the UK in seventh place at 17 per cent and New Zealand at 4 per cent.
Looking at the statistics, it’s easy to figure out a solution as we know if governments give handouts prices rise. Indeed, the changes to the Home Guarantee Scheme, which comes into effect on 1 July, with 50,000 potential applications in the form of government handouts only adds fuel to the fire.
While many more people will have access to housing grants, which on the surface makes it easier for Australians to own their own home, supply and demand dictates the price of housing. Increased demand means increased housing prices, so rather than giving handouts, if the government increased the supply of housing, it would benefit all Australians.
Governments need to provide low-cost housing, and instead of decreasing this, as has been the case for quite some time, if they increased public housing it would achieve several things. The first is that it will reduce the waiting list, which in some states is measured in years not weeks or months, which should be a priority. More supply will also put downward pressure on both rental and housing prices.
Secondly, the government could also offer a rent to buy scheme that assists those who are struggling to survive in the private rental market with housing. It’s about time that we stopped feeding developers huge profits and help those seeking housing to be able to realise the great Australian dream.
What were the best and worst performing sectors last week?
The best performing sectors included Materials up 2.05 per cent followed by Utilities up 1.13 per cent and Energy up 0.44 per cent. The worst performing sectors included Information Technology down 2.95 per cent followed by Communication Services down 1.88 per cent and Healthcare down 1.24 per cent.
The best performing stocks in the ASX top 100 included IDP Education up 9.24 per cent followed by Whitehaven Coal up 8.66 per cent and Pilbara Minerals up 6.26 per cent. The worst performing stocks included Lend Lease down 9.27 per cent followed by ASX down 8.94 per cent and SEEK down 8.36 per cent.
What's next for the Australian stock market?
Probability indicates that the market should be falling and to some degree it has, as it is now seven weeks since the last peak on the All Ordinaries Index. That said, over the last 19 trading days we have only seen the market down around 1.9 per cent, while over the last ten trading days it is up 0.31 per cent. While technically the market is falling, it is neither strong nor convincing.
Currently the All Ordinaries Index is still trading above the low of last week, which is a good sign although we still need to expect further falls. The All Ordinaries Index was down 0.26 per cent last week and while it did trade up on Friday, the close wasn’t strong.
Given this, there is a high probability the market could fall below 7,000 points, although if the market rises strongly over the next two weeks, this will change the probability that the market will rise to the end of July. For now, it’s wise to sit on your hands, be patient and protect your capital, as the time to profit will come soon.
For now good luck and good trading.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the bestselling and award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.