The Financialisation of Housing and the Housing Affordability Crisis in Sydney

Over the last decade, house prices in Sydney have soared and it is now one of the most expensive housing markets globally. In mid-2017, the median price for a detached home reached $AU1.18 million (about $$US900,000). This paper, drawing on documents and existing research, first outlines the features of the current crisis and then examines the key contributors. Key features of the crisis include substantial household debt, dropping homeownership rates, housing stress, an increasing proportion of households consigned long-term or forever to the insecure and expensive private rental market, increasing homelessness and an acute shortage of social housing. What is argued is that the underlying cause of the crisis has been the reconceptualisation of housing in Australia so that it is viewed “as an instrument for profit-making” (Madden and Marcuse 2016: 4). The financialisation of housing has been actively encouraged by government policy. The extremely generous tax-breaks for investors in a context of record low interest rates has resulted in a massive increase in the number of small investors. In 2016 there were 2.03 million landlords in Australia representing 15.7 percent of all tax-payers. The tax breaks offered make purchasing a residential property as an investment an eminently sensible investment strategy and investors are prepared to pay a higher price than a conventional home purchaser. Besides the local dynamics, Sydney’s status as a global city that is perceived as a safe haven, has resulted in a substantial inflow of foreign capital into its residential property market. In many new apartment developments, the majority of purchasers are foreign investors. At the end of 2014, it was reported that Australia, the US and Britain are the first choices for Chinese property investors and that within Australia, Sydney is the favourite destination.