REIA says 'urgent action' needed on housing affordability

By Jon Bragg

May 02 2022
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The Real Estate Institute of Australia (REIA) warned that the latest inflation spike foreshadows a “major decline” in the affordability of housing.

The federal government has been urged to take action on improving housing supply and to scrap stamp duty following the release of last week’s inflation data.

On Wednesday, the Australian Bureau of Statistics (ABS) reported that the annual pace of inflation had reached 5.1 per cent while the Reserve Bank’s (RBA) preferred annual trimmed mean inflation increased to 3.7 per cent.

Many economists now expect that the RBA will announce the first interest rate rise since 2010 at its May policy meeting on Tuesday.

REIA president Hayden Groves warned that coming rate hikes would add to mortgage payments and decrease affordability for first home buyers.

“With the prospect of first home buyers finding it increasingly difficult to enter the housing market, home ownership will continue declining. This is already being evidenced across all states and territories and is most pronounced in the 35 to 44 age group,” he said.

“Addressing home ownership now by both major parties will reverse the trend of falling home ownership and avoid the looming significant policy problem of large numbers of long-term renters aged 45 years and over remaining in the rental sector and possibly requiring rental support in later years.”

Mr Groves argued that failing to address the issue could have long-term budget implications with impacts on the functioning of the economy, the wellbeing of individuals and the cohesiveness of communities and societies.

While acknowledging that low interest rates had made mortgage repayments achievable for many first home buyers, he suggested that the cost of stamp duty combined with the deposit gap still presented a major hurdle.

“With an increase in interest rates imminent that hurdle becomes more difficult. It is time for the federal government to take a leadership role in having state-based stamp duties removed,” Mr Groves said.

The March quarter CPI data from the ABS indicated that housing costs increased by 2.7 per cent on the previous quarter and 6.7 per cent on an annual basis.

Mr Groves pointed out that this was the highest annual increase since 2001 and was largely due to rising construction costs for new dwellings.

“In short, the CPI figures demonstrate the need for urgent action on housing affordability and leadership from the top,” he concluded.

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