Australia’s Housing Crisis Pushing Thousands Into Homelessness

BY Realty+

The Reserve Bank of Australia (RBA) lifted interest rates by 25 basis points, the eighth consecutive monthly hike. The cumulative impact of the rate rises has been to plunge broad sections of the working class into mortgage stress as their monthly repayments continue to rise. This is having a flow on impact, with unprecedented rental costs, growing homelessness and associated distress, including increasing suicide rates.

The impact of the rate rises is exacerbated by runaway inflation, which the hikes will do nothing to address. While official inflation is at 7.3 percent, for household goods and essential basic items the rate is much higher. According to the latest Australian Bureau of Statistics (ABS) figures, for instance, fruit and vegetables had a 16.2 percent annual price increase in the 12 months to the September quarter.

Research agency Roy Morgan has stated that taken together, the rate increases thus far will push one in four home loan borrowers into “mortgage stress.” This, however, is only the tip of the iceberg. Next year, between July and December, at least $275 billion worth of home loans from the major four banks are set to come off fixed rates.

The dangers are compounded by falling house prices. According to CoreLogic, home values in the five largest capital cities, Sydney, Melbourne, Brisbane, Adelaide, and Perth, have dropped by 6.4 percent based on the year-on-year average.  The drop is different in each of the cities, with some values rising, however, Sydney, Australia’s most populous city, has seen an 11.5 percent year-on-year decline.

Some are at risk of becoming ‘mortgage prisoners.’ This occurs when a mortgage holder is unable to refinance their loan and the value of their underlying asset, their property, is less than their outstanding debt on it. The increasing hardships facing mortgage holders are having a flow-on effect, with record rental increases. Mortgage holders who rent out a property are seeking to offset their costs by hiking rents. This is compounded by long-standing issues of supply.

The annual Rental Affordability Index, released last month, found that more than 40 percent of low-income tenants are now in rental stress, defined as spending more than 30 percent of their income on housing costs. Increasingly, there are simply no affordable dwellings for the poor. 

Growing numbers are being pushed into homelessness, underscored by research published by Launch Housing in conjunction with the University of NSW at the beginning of the month. Their Australian Homelessness Monitor 2022 report notes there are no up-to-date statistics measuring homelessness. Instead, they used a proxy measure, the increased caseload of specialist homelessness services. “Across Australia,” the average monthly number of specialist homelessness service (SHS) users grew from 84,800 people in 2017–18 to 91,300 people in 2021–22.” 

Tags : Reserve Bank of Australia interest rates mortgage repayment Australian Homelessness Monitor 2022