Median home prices in Australia have hit record highs. Homes in Sydney and Melbourne have reached a median price of $1.15 million and $826,000 respectively. Further, in the past year, Sydney housing prices have risen roughly 20%. Looking at this situation, economists have deemed that a bubble has formed on the Australian housing market. “Less wealthy” Australian residents will be hurt most when this bubble bursts. Surveys show that, last month, 41% of homeowners would be worried about keeping up with their mortgage payments if they lost their jobs. This is, in part, because people with less wealth tend to invest primarily in their homes.
Thus, concerns have risen at the simultaneous inflated prices of housing and non-increasing worker incomes. Australia’s housing market has been listed among four in the world that are in danger of crashing, given a negative shock to the economy or economic downturn. There is a growing fear of recession, much like what happened in the United States when its housing bubble burst in 2008.
In order to mitigate the impact of the housing bubble on Australian residents, the government is looking to take action. It has been reported that the government is considering incentivizing retirees to downsize their homes. The government could do this by exempting proceeds of sales of large family homes from the in-place cap of $1.6 million. This could free up stock for families and allow older residents to downsize without penalization. Other potential policy solutions are in consideration, and many are waiting for the Australian government to unite and combat this predicament as one, cohesive unit.