A higher unemployment rate in Australia does not mean less affordable housing, new research suggests.
As Australia’s jobless rate rises above that of the United States, questions are being asked about how much longer the housing market can rise and – more importantly – how unaffordable it may get.
However, new research by PRDnationwide’s national research manager, Dr Diaswati Mardiasmo, to be presented at Australia’s Long Term Unemployment Conference on the Gold Coast next week, shows that when unemployment rises, home affordability across the entire market actually increases.
“When people lose their jobs, they might have to downsize, become renters or use equity in their homes, so affordability for them has lessened,” Dr Mardiasmo said.
“However, affordability does not lessen for the broader market.”
Dr Mardiasmo draws upon historical evidence plotting unemployment against the Real Estate Institute of Australia’s affordability index.
She suggests that affordability may improve over a period of rising unemployment due to a number of factors, such as developers re-pricing to meet weaker demand in some areas, vendors of existing homes selling for less, or new buyers such as investors and immigrants being able to buy where they otherwise could not.
“There are occasions when the home loan affordability index falls with a fall in the unemployment rate,” Dr Mardiasmo said. “One should be careful in thinking that a high unemployment rate reduces housing availability.”
The research has been conducted in response to concerns over home and property affordability due to increasing publicity about job cuts – including Toyota and Holden forecasting the loss of more than 60,000 jobs in Australia. Others cutting jobs include Rio Tinto, Qantas, Forge Group, Caterpillar, the Queensland government and Simplot.
While a major factor in affordability – interest rates – remain low, affordability continues to be a major topic of discussion across Australia.
Commentators have called for the Reserve Bank of Australia to remind buyers that affordability constraints should soon lead to a tapering in house price gains.