They say that economic growth is driven by the three P’s of Productivity, Participation and Population. It seems that we may need to add another P – Property.
The Great Australian Dream of a big backyard and a coastal lifestyle has been rekindled during the pandemic and the Illawarra is experiencing a property boom like never before.
Great news for investors and property owners. Terrible news for first home buyers, renters, lower-paid workers and the many employers who rely on them to run their business and deliver products and services to their clients and customers.
In the five years to December 2020, house prices rose 31 percent in Wollongong, 27 percent in Shellharbour, 41 percent in Kiama and 53 percent in the Shoalhaven. Since the pandemic, these price rises have accelerated by almost 15 percent in these regions, more than double the 7 percent growth in Sydney. Rental availability rates for April 2021 were 0.8 percent in Wollongong compared with 3 percent in Western Sydney.
With record low interest rates and more support for people buying homes in the Federal Budget, including packages for single parents and first home buyers, the property market may remain hot for some time.
The Illawarra’s attractiveness is a double-edged sword, and while many benefit from the property boom, there are negatives for our local economy that will affect all of us.
We recently surveyed a number of our members in the retail, hospitality, arts and tourism sectors who confirmed that businesses are struggling to attract workers in the wake of the pandemic.
One of the key issues raised is the lack of affordable housing in the region. To our south where the tragic loss of houses to the 2019 bushfires followed by the influx of new residents during the pandemic has only compounded the problem.
A 2019 study found that moving workers close to a wider range of jobs would lead to a $17.57 billion boost to the NSW economy over 40 years. Other benefits include more money spent in local economies, health benefits and reduced strain on public transport as well as improvements to local infrastructure.
Housing affordability is one thing, but “affordable housing” is another entirely. The former reflects the relationship between expenditure on housing (such as the price of housing, mortgage repayments or rents) and housing incomes. The latter is defined by the Housing Trust, an Illawarra First member, as that which “appropriately meets the needs of very low to moderate income households” where “rent is priced at a discount to market rent”.
Both are important to our economy. The inability to affordably house workers close to where they work is a handbrake on business – it is difficult to attract people when they have nowhere to live. Further, as house prices rise, new home owners take out larger mortgages which means paying a higher percentage of their income on loan repayments and ultimately higher household debt. Over the last decade the median house price in the Illawarra has increased by 64 percent, resulting in housing stress for those on lower incomes.
Housing affordability is a complex issue that touches on all three levels of government, particularly in relation to planning and land use, as well as private investment, tax and foreign investment among other matters. Addressing the causes of a limited supply of land for development as well as the scarcity of affordable housing in areas where people want to live are key policy areas, in addition to the prevailing focus on policies to support demand.
We welcome several aspects of the NSW Government’s Illawarra-Shoalhaven Regional Plan released last week, which highlight a number of other existing plans and strategies on housing, including the Shoalhaven Affordable Housing Strategy 2018, and Wollongong City Council’s Draft Housing and Affordable Housing Options Paper 2020. Ominously, it also projects that the region will have at least another 100,000 people and will require a minimum of 58,000 more homes by 2041. That’s just under 3,000 houses per year.
We should all be focussed on helping find the right solutions, with land release programs and targeted funding, loan guarantees and other financial incentives for development high on the list. Collaborating with community housing providers, such as the Housing Trust, will help build capacity, increase supply and ultimately generate jobs and economic growth. At a federal level, there is the National Housing Finance and Investment Corporation, which is dedicated to the creation of affordable housing and is doing great things in our region and other areas where there are acute housing shortages.
Business Illawarra is prioritising housing policy as a key area for reform. All levels of government and other key industry stakeholders must work to deliver housing solutions to our community.