Originally published in The Australian Financial Review by Su-Lin Tan
A better housing blueprint, financial literacy for homebuyers and a sustainable access to credit following the banking royal commission are critical to the resolution of Sydney and Melbourne's housing affordability issue, CoreLogic's Olumide Soroye says.
Mr Soroye, the managing director for the Information Solutions business of the housing property research group, who is on his annual Australian trip, says he is impressed with the outcome of Australia's housing macroprudential policies, particularly in Sydney, but more can be done around the balance between supply and demand of housing.
On housing supply, Mr Soroye has encouraged groups such as state and local governments and bodies like the Greater Sydney Commission to work in unison.
"The bodies are trying to access problems in silo but they haven't stepped back particularly for Sydney, and say 'this is what we project demand is' and set the end state and time frame," Mr Soroye said.
"Responsible groups must think of a more wholistic housing supply strategy that includes both infrastructure and transport strategies as well.
"Someone needs to plan how many multifamily and single-family dwellings for purchase and rental and decide where they want to be. I haven't seen a blueprint, someone needs to create that." Multifamily dwellings are the name for apartments in the US.
The new Greater Sydney Commission comes close to this but its timeframes may be too long, Mr Soroye suggests. He has indicated a "five to 10-year" goal.
On demand, Mr Soroye cautioned Australia not to stack on "layers of bureaucracy" which can hurt the supply of credit to those homebuyers who are qualified to borrow for a home.
"Australia needs a sustainable access to responsible credit ... and making sure things like the royal commission process doesn't tick over the other way. There is a lot of good out of it, but if you layer on more levels of bureaucracy, then it can constrain the supply of credit," he said.
And to those who can borrow, they need to be educated on not rushing into the so-called "Australian dream".
"A lot of pain in life is because people have the wrong expectations," he said.
"There needs to be a benchmark for buyers, on what to expect ... so people start to understand and they can self access if they are ready to buy a home."
The US is suffering the same problems, Mr Soroye said.
The US housing market has been improving since the sub-prime crisis 10 years ago, and now faces higher prices which have recovered to pre-GFC levels. Cracks in the form of affordability problems are starting to appear, he said.
The US is also looking at credit access and financial literacy but is also trying to boost wage growth, to keep up with rising house prices.
"We are adopting policies that drive income growth ... a lot of the tax cuts, even though they are late in the cycle, go to businesses and middle-income families as well. This applies to Australia to start thinking about driving income growth."
These efforts suggest that it takes a "whole" village – and not just the government – to address housing affordability.
Mr Soroye doesn't think there will be a major change in the US government's plans to keep interest rates steady – after the last rate rise in March – with possibly another one or two rate rises, with the US economy strong but still fragile.
This will put less pressure on Australia to follow suit with a rate rise.