As part of NHFIC's research function, we also complement existing research, reflecting on the adequacy of construction rates and land supply to meet future needs.
This paper builds an empirical model of the Australian housing market and finds that low interest rates explain much of the rapid growth in housing prices and construction over the past few years, while high immigration helps to explain the tight housing market and rapid growth in rents in the late 2000s.
The paper examines the experiences of vulnerable people in the private rental market and also discusses policies that affect outcomes for vulnerable renters. The paper shows that there has been an increase in the share of the population renting privately since the mid-1980s — a reversal of the long run decline in this share since World War II and that many vulnerable private renter households struggle with rental affordability.
The National Housing and Homelessness Agreement is the Agreement that exists between the States and the Commonwealth governments with the aim of improving housing outcomes across the country. It recognises the Commonwealth and the States' mutual interest in improving housing outcomes across the housing spectrum, including outcomes for Australians who are homeless or at risk of homelessness, and the need to work together to achieve those outcomes.
Supply-side factors can affect the responsiveness of new dwelling construction to changes in housing demand. Recent reports and liaison with industry participants point to a range of supply-side rigidities in the Australian housing market, including the length and complexity of the planning process, issues related to the provision and funding of infrastructure, land ownership and geographical constraints, and other challenges related to infill development. In recognition of this, governments have made some progress in addressing these concerns.
This report finds the effect of monetary policy on housing prices varies substantially by local housing market. The authors show that this heterogeneity across local housing markets can be partly explained by variation in housing supply conditions – housing prices are typically more sensitive to changes in interest rates in areas where land is more expensive.
But other factors are important too. Specifically, they find the sensitivity is greater in areas where incomes are relatively high, households are more indebted and there are more investors.
Taken together, this suggests that the state of the economy can affect the sensitivity of housing prices to monetary policy. They also directly explore how monetary policy affects housing wealth inequality. They find that housing prices in more expensive areas are more sensitive to changes in interest rates than in cheaper areas. This suggests that lower interest rates increase housing wealth inequality, while higher rates do the opposite. However, these effects appear to be temporary.
This paper examines the factors driving long-run trends in Australian housing price growth over the past three decades. During the 1980s, housing prices grew broadly in line with general price inflation in the economy. The period from the 1990s until the mid 2000s saw relatively strong housing price growth associated with a significant increase in the debt-to-income ratio of Australian households. Since the mid 2000s, strong population growth has played an increasing role in explaining housing price growth.