Australia’s budget is expected to target housing affordability crisis

Australia plans to address its climbing home prices in its national budget as the country struggles with a shortage of homes.

Despite the Reserve Bank of Australia’s aggressive monetary tightening efforts, home prices have steadily risen since bouncing back from a downturn in 2022. Recent figures by property consultant CoreLogic reveal that home prices rose for the 15th straight month in April. The median Australian home price now stands at 779,817 Australian dollars ($530,115).

Rents are also shooting up, rising 7.8% annually, according to Australian Bureau of Statistics data published last month. That’s the biggest jump since March 2009. It noted that rental price growth for flats has outpaced price growth for houses.

“Affordability is currently at the worst levels on record in Australia from a mortgage serviceability perspective,” said Eliza Owen, head of research at CoreLogic Australia. She also predicted that home values will continue to rise this year, though less than in 2023.

Treasurer Jim Chalmers is set to deliver the budget on Tuesday, which is expected to focus on addressing the nation’s housing crisis.

The Albanese government has already said it plans to allocate 88.8 million Australian dollars ($58.7 million) to train 20,000 local workers for the construction and housing sector. It also plans to spend AU$1.8 million on streamlining skill assessments for 1,900 potential migrants and prioritize 2,600 for targeted occupations.

The sharp rise in construction costs, labor and materials shortages have slowed the delivery of new builds, hampering the supply of new housing, according to a recent report by PropTrack.

“On the supply side, new housing had been constrained by ongoing capacity constraints – particularly for finishing trades and where the required skills were easily transferable to non-residential construction – and rapid increases in construction costs,” said the RBA during the recent March board meeting.

Developers and housing advocates have called on the Australian government to lift a ban on foreign skilled construction workers using a new fast track visa stream. Opposition leader Peter Dutton had criticized the Albanese administration, alleging it has shut doors to skilled tradespersons while failing to address migration issues.

“There’s an extraordinary mismatch in the supply and demand for housing in Australia at the moment. Most recently the contribution to that mismatch comes from record highs in net overseas migration amid a choke-hold on the residential construction sector from increased material cost and tight labor supply,” said Owen. “So you have a slower rate of completion in new dwellings amid an influx…