"We're asking around $430,000", said the real estate agent. Far too much for a shady, south-facing 1970s apartment that needs work, I thought. My friend, whom I was accompanying on her search for an apartment, commented that she had seen similar offerings around the $380,000 mark. We were at Collaroy on Sydney's northern beach strip, a middle-class area enmeshed in Australian beach culture. Hoping to make the move so she would be closer to her place of work, my friend was selling the southern suburbs family home she and her relatives have inherited.
The sale of homes on her street reveals how much the Sydney residential property market has blown out. Two years ago the late-1940s fibro house next door sold for $650,000. Just recently, a similar house two doors down, a house on the same-size block, sold for $850,000. That is a $200,000 rise in two years. Then, just six weeks ago, the larger block with three-bedroom house adjoining the park sold for $1.2 million.
Such prices are the stuff of Sydney's over-heated housing market, a market quickly becoming a political and, maybe, an electoral issue. The high prices are good news to those selling and moving out of town but not such good news to the growing number of first-home buyers that cannot afford a home in the metropolitan area. They are forced to towns within commuting distance of Sydney, such as those of the Illawarra region, where they increase demand and prices and spread Sydney's housing problems further afield.
High housing prices contribute to yet another "haves/ have-nots" divide in Australian society - those who have and those who do not have the means to buy a home. This reality is recognised by all sides of politics and, like education and medical care, housing unaffordability is another sign of the approaching death of the Australian notion of fairness.
Economic and social factors limit affordability
A number of trends have come together to perpetuate a situation that some in the real estate industry say could continue for years. One of these is investment buying - the purchase of property for later resale by people who already own or who are buying a home.
Investment buying has sustained Sydney's apartment market although it now shows signs of weakening. The market has been boosted by the conversion of old industrial properties in the inner and middle-distance suburban ring to medium-density residential development.
Sydney, however, is running out of old industrial sites. Now developers are interested in buying the airspace over railway stations. St Leonards railway station, on the lower North Shore, has already been built over. Developers are now eyeing Hurstville and Kogarah Stations, both of which are already built over with modest, one-level shopping facilities but which would be rebuilt as multi-level apartment/ retail developments housing hundreds.
A more indirect contributor to the unaffordability of housing is the casualisation of the workforce, almost one-third of which now puts in less than 40 hours a week. Although casual hours suit some workers, it is a fact that many casual workers would prefer to go fulltime and have greater employment security. Casual work reduces security of employment to a day-to-day timeline. Any business person knows that without a degree of certainty regarding cash flow, investment in longer-term plans is risky. It is exactly the same with casual workers who would like to enter the housing market.
There is a further factor influencing Sydney's high housing costs and it is unlikely to be remedied without rancour. It is overseas immigration and it swells Sydney's population by around 50,000 a year.
According to new research by Monash University's Centre for Population and Urban Research, overseas immigrants are responsible for up to 76 per cent of the demand for housing in the city. In comparison, immigration in Melbourne's accounts for 61 per cent and in Brisbane a lowly 31 per cent. As NSW Premier Bob Carr has pointed out, immigration creates strain on services such as water, sewage and public transport at the same time that it increases demand for residential property. The research identified immigration as a major factor in the city's housing boom.
A reduction in immigrant numbers would make housing more affordable but it is too much of a hot potato with a federal election looming. No party wants to risk alienating the ethnic lobbies which, sooner rather than later, could resort to allegations of racism in an attempt to discredit those proposing changes to immigration policy.
Stabbing at solutions
State and federal government have touted various financial fixes to housing affordability. Joint ownership with banks, the first-home buyers grant, a federal proposal that the NSW government reduce its high rate of stamp duty (according to commentators this boosts home prices by $15,000), higher interest rates, even an inquiry into housing affordability.