Housing affordability crisis forces buyers to seek alternative solutions

Property buyers are increasingly turning to alternative purchasing strategies as Australia’s housing affordability crisis deepens amid rising costs and limited supply.

NAB’s Market Megatrends 2024 report revealed home ownership had fallen to 67 per cent in 2021, down from 70 per cent in 2006.

The report highlighted a significant disparity between housing supply and demand, with only 45,000 dwellings completed in Q2 2024 despite population growth of 164,000 in Q1.

Over the past five years, home values increased by 46.5 per cent and rents rose by 39.9 per cent, while wage growth lagged significantly at 15.3 per cent.

The price gap between houses and units in capital cities has reached extreme levels, with Sydney recording a difference of up to $612,900, according to NAB.

“Even with government grants and incentives, the gap between what people can afford and what’s available continues to widen. Property prices keep climbing. Borrowing capacities are shrinking. Many buyers are simply priced out of the market,” said Nathan Smith, director at Birdie Wealth.

First-time buyers are increasingly turning to “rentvesting” as a solution, with NAB data showing 8,524 first home buyers took out investment loans rather than owner-occupier mortgages in the 12 months to August 2024, representing a 24 per cent increase year-on-year.

Regional areas have also emerged as an alternative for metropolitan buyers seeking affordability.

“It’s not always about finding the dream home right away. Sometimes, it’s about helping buyers make compromises – whether it’s considering smaller properties, further locations, or different loan structures,” Smith said.

Mortgage brokers are adapting their approach to focus more on comprehensive financial planning rather than just securing loans.

“We’ve moved away from simply chasing the lowest interest rates to focusing on who offers the best overall solution for the client. This includes looking at borrowing capacity, how banks assess serviceability, and which lenders have more flexible policies that suit individual circumstances,” Smith said.

He noted that borrowing capacity could vary significantly between lenders, citing a recent case where the difference was $40,000 for a first home buyer in Sydney.

“The market is evolving rapidly, and for many buyers, the process can feel overwhelming. As brokers, we’re here to coach them through, helping them understand their financial position and find solutions that work for their specific situation,” Smith said.