On the commercial side, Australia’s industrial properties performed well throughout 2023 and demonstrated resilience amid an otherwise struggling commercial real estate landscape. While retail rents recovered across Australia in 2023, e-commerce expansion has been hampering brick-and-mortar retail activities and affecting retail space demand. Office spaces were hit the hardest due to the pandemic-induced work-from-home boom, with elevated vacancy rates across Australia’s office properties.
Australia’s housing affordability conundrum
Housing affordability is a much-contested issue in Australia, with many people struggling to get onto the property ladder as house prices remain largely disproportional to household income. In the third quarter of 2023, the house-price-to-income ratio skyrocketed to 121.7, the highest ratio recorded in the past five years, making the homeownership dream increasingly challenging and the risks associated with purchasing a property greater. Due to this, many individuals and families rent for prolonged periods. Nonetheless, rental properties are also becoming more expensive, with the average weekly rent for a house in Sydney at approximately 730 Australian dollars as of December 2023.With housing demand continuing to rise in tandem with the country’s population expansion, Australia’s supply and demand imbalance and largely unaffordable residential housing supply have come under scrutiny. The Australian government’s Help to Buy scheme, set to commence in 2024 and span over four years, hopes to break the ceiling on buyers’ ability to access the property market by increasing borrowing power, especially for first-time buyers, following a substantial decline in first home buyer loan activity in 2023. Nonetheless, the scheme has been met with a mixed reception. While it may facilitate short-term relief to its 10,000 annual participants, it could inflate demand without addressing the core issue, the country’s insufficient housing supply relative to population growth, and worsen housing affordability in the long term.
