why is the housing market in Australia so bad?
In: Economics
Currently? There is a global housing supply crunch in every decent country. This is partly a holdover from the freeze in construction during COVID and exploded as borders reopened and demand skyrocketed. Stimulus packages pushed inflation hard, but housing supply is pretty inelastic. Additionally, everyone (globally) is competing for construction materials.
But there is also a trend of housing investments from the ultra rich from China and Russia – before anyone says that Australia’s property is overwhelmingly locally-owned, I would remind people that it is trivially easy for the rich to acquire permanent residency here. Both countries are experiencing an outflow of capital due to crackdowns from their governments and the rich are looking to store their wealth overseas. This is a *very* big reason for housing prices skyrocketing in stable first-world countries.
For Australia specifically there is another factor – labor. Australia’s unions have made it very hard to import labor – they have to undergo strict skills assessments and have recognized qualifications, so with the crazy global demand they are instead moving elsewhere. Local labor is in serious short supply because COVID made a whole bunch of older workers decide to retire early. Those who have trade skills tend to gravitate instead towards the mining industry which pays amazingly well, so that exacerbates the shortage. Australia’s construction industry is also not particularly oriented towards building high-density housing, because the country has no shortage of land and people prefer houses. To explain – building high-rise apartments is a wonderful way to ease a housing shortage, but you need people with skills at working those heights. Australia has not enough people with those skills.
Then there is the controversial factor of immigration. Australia took in a LOT of new immigrants and students to repair the economy after COVID. Whatever you personally think about the merits or flaws of immigration, it does not change the fact that immigrants need a place to stay. This caused demand to explode even further.
It is a combination of factors that caused the housing shortage and skyrocketing rents globally across the first world, but Australia was hit worse than many others because of its circumstances.
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