Tag Archives: affordability

Why should you should consider renting?

Why should you should consider renting?When it comes to living in Australian property, purchasing with home loans seems to be the default choice. For many, there’s a general impression that renting property is some kind of short-term bridge between leaving your family and buying your first home.

But if you’ve had your eye on real estate news for the last few years, you’ll notice that purchasing real estate in Australia is getting increasingly difficult, particularly in certain capital cities.

While there are many great perks and benefits from owning property, there are also key advantages to renting that make it an appealing option.

Affordability

Affordability is a big factor for anyone. In this field, the case for renting seems to have the upper hand.

The Housing Industry Association reported in June that the National Affordability Index dropped by 2.9 per cent. Sydney and Melbourne saw the greatest decreases, at 6.9 and 9.1 per cent respectively. This demonstrates that housing prices are rising faster than people’s earnings.

While people with low interest home loans can still find ways to adapt and purchase property, it outlines just how comparatively affordable renting could be.

The deal with yields

The best way to observe this comparison is not just to examine rental rates, but to take a look at yields. Sure, rates can give you a snapshot into how much it’ll cost you per week, but this alone will not give you a holistic view.

Yield figures on the other hand, will show you how renting stacks up to buying property in the current market, which is the real contest here. This can be defined as the percentage of rental income to the home’s purchase price.

For instance, CoreLogic RP Data research notes that the median rental price for a Sydney house was $610 in July. This figure might seem high and have you consider buying instead.

However, figures reveal that Sydney’s rental yield was down 0.2 per cent over the quarter, and decreased by 0.6 per cent over the year to July. This shows that rental income were in fact lower than they should have been when considering property prices.

This is true for many of the other capital cities as well, and is a sign that renting could the far more affordable option in relativity to housing prices.

Stable rates

Another good reason to look at houses for rent is the fact that rates have been mostly stagnating. Australia’s combined capital cities experienced a 0.7 per cent decline in rates over the September quarter, with every single one recording negative change.

Melbourne has lead the charge in rental growth over the year, showing a 2.1 per cent rate increase in the year to September but clearly, this figure is hardly something to worry over.

With stable rates that are lower than property prices would have them, anyone who may struggle with mortgage repayments should consider renting instead.

How does construction support affordability?

How does construction support affordability?It’s hard to ignore the rapid rate at which homes have been popping up around the country. Construction has been a bright spot in real estate in Australia for some time, with a steady stream of properties helping to support confidence, jobs and keep the economic wheels spinning. Not only that, but it creates opportunities to buy a house.

This impressive activity is showing little sign of slowing down, either, as new figures from the Australian Bureau of Statistics (ABS) show strong growth during May. According to the latest building approval data, the total number of new dwellings approved for construction increased 2.4 per cent during May in seasonally-adjusted terms.

In fact, there has been a 17.6 per cent rise over the 12 months to May. The Property Council of Australia pointed out that this is an encouraging sign for affordability, particularly for real estate in Sydney.

Executive Director Residential Mr Proud noted there were 70,000 more approvals in the past year than in the 12-month period to May 2012, with New South Wales in particular showing strong improvement. Some 57,088 new dwellings were approved in seasonally adjusted terms in NSW for the 12 months to May 2015, a 10 per cent rise on the same period to May 2014. This could represent an important step forward for reducing housing deficits and counteracting rapid price growth.

“The only meaningful way to take the pressure off prices is to increase new housing supply,” Mr Proud said.

Strong growth in multi-unit properties

Construction activity has been especially strong in the apartment segment. Master Builders Australia said multi-unit approvals posted an all-time record in May, with 7,300 dwellings in buildings of four storeys or more approved over the period. While this means multi-unit homes for sale may be more accessible when completed, detached houses still face supply pressures.

Master Builders Chief Economist Peter Jones said policy restrictions on releasing greenfield land may be holding the industry back. This point was echoed by the Housing Industry Association (HIA), which highlighted a 15.1 per cent increase in multi-unit approvals during May. However, approvals for freestanding homes dropped 8.5 per cent over the month.

HIA Senior Economist Shane Garrett said this means policy makers need to do more work to ensure a steady supply of both affordable apartments and houses for sale.

“They must rectify the bottlenecks in the planning system, redress the excessive fees and charges on new residential developments and ensure that the pipeline of residential land will meet the ongoing community demand for new homes,” he concluded.

With such a solid supply of properties in the pipeline, maintaining this level can support affordable and help households buy a home in Australia.

What’s the deal with housing affordability?

What's the deal with housing affordability?If there’s been one question that’s coloured real estate discussion in 2015, it’s been this: How can we make houses for sale more affordable? It’s certainly something that home buyers have been keeping an eye on, and the resulting debate has kept policy makers busy. There’s been plenty of solutions raised, but a new report from the Property Council of Australia shows that it could come down to decisions made at all levels of government.

The 2015 Development Assessment Report Card has taken a closer look at the efforts made in each state and territory to improve planning and development. These two factors have a big part to play in the housing supply debate, but slow and complicated processes make it a lot harder for homes to be built.

Property Council Chief Executive Ken Morrison said that while the report shows that some places have done better than others, most are making positive changes.

“The only really effective way to make housing more affordable is to build more homes, build them faster and at lower cost,” Mr Morrison said in a June 4 release.

“Our planning processes are the key to all these solutions.”

The Northern Territory and Western Australia performed especially well, taking out the top two positions. On the other hand, New South Wales plummeted down the listing, something that NSW Executive Director Glenn Byres said needs to be put right for the sake of affordable real estate in Sydney. The state ranked seventh, highlighting that a fair bit of work needs to be done to bring the system up to scratch.

Fortunately, Mr Byres pointed out that things are headed on the right course.

“The government has made some good progress at the strategic level, particularly with the integration of freight, transport and broader infrastructure plans,” Mr Byres said in a June 4 statement.

What can be done?

With most states and territories already headed in the right direction, what else can federal, state and local governments do to ensure there are enough homes for sale to meet demand? The Housing Industry Association (HIA) has provided an answer that has been well documented: Tax.

In a June 3 statement, HIA Chief Economist Harley Dale pointed out that levies on buying a home are the real driving force behind price rises across the country. For instance, a recent Property Council study into the economic importance of the real estate market found that approximately 16 per cent of all taxes paid are related to the property industry – a figure more than double the OECD average.

But Dr Dale highlighted that the government can set the record straight, in terms of both planning and taxation.

“The truth is that most of the problems having an impact on housing affordability are caused by governments and therefore governments can fix them,” said Dr Dale.

With the challenge clearly set, it’s up to governments to grasp the opportunities with both hands and ensure real estate in Australia is well on track – and home buyers will no doubt be waiting with bated breath to see what the outcomes will be.