As Sydney’s housing prices forecast a striking 12% increase over the next two years, the city finds itself at the precipice of a housing affordability crisis. A boom in immigration, paired with a net housing supply that’s at an all-time low, sets up a perfect storm for government officials at a local and state level.
In a city renowned for its opera house, the real estate market is staging a show that few can afford. With prices poised to rise by 6.9% this year alone, according to NAB’s latest forecast, the average Sydneysider’s dream of home ownership is slipping further into the realm of the unattainable.
Contrastingly, Melbourne appears to be navigating the crisis more successfully. The Victorian capital is the only Australian city predicted to develop a build-to-rent (BTR) market of significant scale by 2030. This is thanks largely to a greater number of suitable sites for development and a more responsive approach by the local government.
By 2030, Melbourne is expected to host 30,000 of the estimated 52,500 completed BTR homes in Australia. This city has already witnessed successful BTR projects such as Home Southbank, LIV Munro, and Realm Caulfield. Such initiatives could provide a roadmap for Sydney, where the limited scope for BTR has contributed to the burgeoning affordability crisis.
Unfortunately, even as we navigate the labyrinth of the housing crisis, another critical issue has surfaced: the insolvency of construction companies. From 1,639 insolvencies this time last year, the number has spiked to 2,810 as of June 2023. This unsettling trend, coupled with the rise in housing prices, puts additional pressure on an already stretched market. While other countries, like New Zealand, the US, and Canada, have seen builders lift prices to account for rising costs, Australia’s adherence to fixed-price contracts in home building locks in losses, which exacerbates the risk of insolvency.
But as Sydney faces these twin crises of affordability and insolvency, it’s clear that the need for local action has never been greater. With Melbourne pioneering solutions, the time has come for local and state leaders in Sydney to follow suit. By increasing the rental housing stock, reducing the return from short-stay lettings, and easing the transition of properties from Airbnb to the long-stay market, Sydney can begin to chip away at its housing crisis.
In a nation of contrasts and challenges, Sydney’s housing affordability crisis is not insurmountable. However, it necessitates decisive local leadership, concerted effort, and the courage to implement innovative solutions. As we stand at the crossroads of affordability, the path we choose will shape the city’s future.
Sources:
“Sydney house prices to rise 12 per cent over two years: NAB” (AFR, July 20, 2023)
“Only Melbourne will offer build-to-rent at scale by 2030” (AFR, July 13, 2023)
“Why rents are set to keep rising” (AFR, June 28, 2023)
“Great construction company collapse: What to do if your builder goes bust” (UNSW Newsroom)
“Builder collapse shows Australia an outlier with fixed-price contracts” (AFR, August 25, 2022)