A new book aims to fix housing affordability, but there's a better solution for Victoria
The new book by US-based journalists Derek Thompson and Ezra Klein calls for deregulation to ease supply-side restrictions on housing and other vital industries to make houses (as well as healthcare and clean energy) more affordable, accessible and abundant. It doesn't deviate from conventional economic wisdom in this regard, and it's been widely read in Canberra. Its ideas are likely to be part of the discussion at next month's productivity summit.
Australia's political system already has a neoliberal consensus; there is bipartisan support to grow the economy by making it easier for corporations to do business and for capital to flow. This same logic is already applied to the housing market, visible in our recent preference for supply-side solutions.
One key area where Thompson and Klein hit the nail on the head, however, is the negative effect that restrictive zoning has on housing supply. Victoria has been building more new homes per person than NSW for years, but, like much of Australia, it still faces challenges from local councils to promote infill development and improve housing access in inner Melbourne.
It's against this backdrop that the latest house price figures were released on Thursday. Victoria's affordability achievement was modest; house prices in Melbourne are 2.7 per cent below their December 2021 peak on Domain data, but remain unaffordable to most. Melbourne's median is $1,064,000, Sydney's is $1,722,000, and Brisbane's $1,060,000. However, lending data show first home buyers made use of the 3½-year window to purchase.
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'It was good, it has to be seen as good, prices did come down a bit,' AMP chief economist Dr Shane Oliver says.
'That would have provided some opportunities for first home buyers that they wouldn't have otherwise had.
'But affordability is still relatively poor in Victoria, it's just not as bad as some other places – Sydney, Brisbane and even Adelaide.'
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