Dynamics of housing affordability: a new perspective from the LGA level

This study highlights the importance of housing affordability at the Sydney Local Government Areas level by providing a descriptive analysis of factors affecting housing affordability and examining housing affordability for homeowners and renters using the ‘ratio approach’ from 2001 to 2016. It is observed that housing affordability deteriorates over the observed period for homeowners, partly because the percentage increase in income cannot catch up with the percentage increase in dwelling prices. However, an improvement in housing affordability for renters is shown after 2011. Housing affordability for homeowners is also examined using the user cost approach. The analysis is conducted separately for existing homeowners and first home buyers to capture the housing stress differences between the two. Housing affordability improvement is found for both groups of homeowners after 2011. Nevertheless, first home owners are observed to be more prone to suffering from housing stress compared to existing homeowners. Therefore, measures can be taken to help potential first home owners gain home ownership. With reference to geographical differences on the issue of housing affordability in 2016, it is observed that Western Sydney is considered more affordable than the Eastern side. This situation is due to the NSW government’s intention of developing the north-western part of Sydney. As a result, more dwellings are expected to be built there at a lower price compared to those located in the inner ring of Sydney. To conclude, this study provides an updated picture on housing affordability situations at the Sydney Local Government Area level and gives policy implications on housing affordability accordingly.