Housing affordability, scarcity and mortgage interest rates to get worse

Housing affordability will get worse before it gets any better, with mortgage interest rates more likely to rise over the next year or so, the federal opposition's housing summit was told today.
Financial markets are already betting the Reserve Bank of Australia will need to raise interest rates next month to kerb renewed signs of price pressures.
Any rise will compound already stretched household budgets after last year's three interest rate rises.
More than 100 experts in finance, economy and politics have joined federal and state Labor politicians at Parliament House in Canberra to find solutions to the housing affordability crisis.
ANZ Bank chief economist Saul Eslake told the conference that high interest rates were the cause of the last housing crisis in the late 1980s, which was later countered by low interest rates.

But this time the problem was also rising house prices, which would be “a problem for sometime to come,'' Mr Eslake said.
Lower mortgage rates would help, and authorities should aim to put downward pressure on interest rates, and “saving more from the resources boom than the present government,'' he said.
Young are the victims
The conference was told that the main victims in the current housing crisis are under the age of 35 that typically borrowed too much during the 2000-2004 housing boom.
This group is now suffering from rising interest rates, and in some cases are having to take on a second job to meet repayments.
NSW Planning Minister Frank Sartor said the cost of building houses was accelerating, and needed to be countered with a quicker turnaround in housing permits.
But he disagreed with the federal government's solution to the housing problem that it was just a question of releasing more land for housing and cutting state housing related taxes.
Mr Sartor said cutting taxes would just lift house prices by the amount of the tax cut. This is a similar argument the government uses for not raising the $7,000 First Time Home Owners Grant.
But in any case, the conference was told that the value of the grant has been hugely diminished due to the rise in house prices.
The Government is undertaking a national land audit to find suitable areas to build new housing, and continues to press states and territories to cut land taxes as part of the GST agreement.
Infrastructure is key
Australian Local Government Association president Paul Bell says it is not just a question of building new houses, but building them where people wanted to live, with proper services and infrastructure.
”Housing supply has to be where the housing demand is,'' he said.
Housing Industry Association managing director Ron Silberberg says states will suffer a $50 billion shortfall over the next 10 years as they try and keep up with new infrastructure needs.
He said there should be a residential infrastructure fund, similar to Auslink and the government's new roads initiative, to allow for a synchronised roll-out of infrastructure with new home building.
Another problem for new home buyers is they are competing with investors who can gain tax benefits from investing in property, and are driving up house prices.
But Mr Eslake said saving initiatives to help fund the deposit for a new home, such as a superannuation-type scheme, should be aimed at buying a new property rather than inflating the price of an existing home.