With Australia grappling with the effectiveness of using superannuation for housing deposits and the UK innovating in the buy-to-let mortgage sector, both countries face ongoing challenges and shifts in their housing markets amidst affordability crises.
Recent studies and market developments highlight the ongoing challenges and shifts in the housing sectors of Australia and the UK.
In Australia, the Association of Superannuation Funds of Australia (Asfa) released findings indicating that young couples in Sydney and Melbourne may struggle to accumulate a 20% housing deposit even by depleting their entire superannuation savings. This calls into question the effectiveness of the Coalition’s policy proposal, allowing first home buyers to use up to $50,000 of their super for a home deposit. Asfa’s research suggests that although this policy might initially seem to aid first-time buyers, it could lead to increased house prices, thereby disadvantaging those with lower super balances. Moreover, the practice could negatively impact future retirement savings. The association advocates for a comprehensive approach to housing affordability, beyond utilising superannuation funds.
Meanwhile, in the UK’s buy-to-let mortgage sector, The Mortgage Works, a Nationwide branch, introduces a pioneering offer. Starting 26 March, it will provide a 3.99% five-year fixed-rate mortgage at a 55% loan-to-value ratio, coupled with a 3% fee. This development is a response to speculation about potential interest rate reductions by the Bank of England. The move aims to alleviate financial pressures on landlords and tenants, energising the market with competitive rates that may influence the strategies of other lenders, including Nationwide.
The UK’s overall housing market is also witnessing changes. The housing affordability ratio improved in 2023, with wage growth outpacing house price increases. However, experts like Anthony Breach from the Centre for Cities caution that this improvement might be fleeting due to deep-rooted issues in housing supply and outdated infrastructure. Despite a short-term positive shift, structural problems like insufficient construction and the lag in modernising older homes maintain the UK’s stance as having some of the worst-value housing among advanced economies. London remains particularly inaccessible, with a glaring disparity between earnings and housing costs.
Both Australia’s and the UK’s real estate sectors are undergoing critical evaluations and adjustments amid affordability crises and policy proposals, with each presenting unique solutions and challenges.
