Australian cities have a problem with housing affordability. Blame for this has been assigned to a number of causes including lack of supply, red tape, stamp duty, and the market distortions of negative gearing and first home buyers schemes. It all helps to tell us how we got here. However, what we really need is a way to fix the problem. Unfortunately, what many people won't admit is that house prices need to fall, at least in real terms, for housing to become more affordable. This can either be via a fall in prices or, and it would take much longer, growth in house prices below the rate of growth in median income.
The elephant in the room? Two thirds of households, those who own their home or those with mortgages, aren't going to like either option. Any moves that reduce housing costs to aid affordability are likely to upset a sizable portion of the voting population. It will take a very brave Government indeed to implement such measures.
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