The adoption of urban containment has played a huge role in worsening housing affordability in Australia, according to David Naylor, co-founder and director of Chan & Naylor, a national property, business tax accounting, and wealth advisory group.

“Experts are divided [as to why housing affordability is worsening] but you only need to look at the ever-changing streetscapes of our major cities to see that housing density has increased, usually by building more apartments in established residential areas. The experts call this urban containment,” Naylor said.

Wendell Cox and Hugh Pavletich, co-authors of Demographia International’s 14th annual Housing Affordability Survey, define urban containment as a policy in which housing density is increased, usually by building more apartments in established residential zones. The policy also aims to limit or prohibit new housing developments in the fringe areas of cities.

“The recent boom in apartment building is not helping and some argue that the government should encourage more detached, medium-density dwellings to be built in the middle and outer-fringe areas, particularly to keep up with the challenges of strong population growth,” Naylor said. “But this is expensive if the appropriate infrastructure is not in place such as schools, hospitals and transport.

“However, it’s not all doom and gloom when it comes to affordability. According to CoreLogic data, their figures showed Sydney property owners typically spend 48% of their annual household income paying off their mortgages. They state this is lower than what people were paying back in 2007, when housing prices were half of what they are now, but interest rates were higher,” Naylor said.

The bottom line is that homeownership in Australia’s biggest cities has become increasingly expensive. “There must come a time where there is a correction either via wage growth or a combination of monetary and fiscal policy,” Naylor said.

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