Sydney’s census lesson: Bold action needed to tackle housing affordability

The 2021 census, released last week, showed a prosperous, growing Sydney. The city’s median family income reached $123,450 a year, about $20,000 more than when the last census was taken in 2016. New arrivals from across the world helped lift Sydney’s population by 400,000 since the last headcount. Our city’s diverse, expanding population is a major economic asset.

But the census also drew attention to some worrying trends stemming from the high cost of housing. Despite favourable conditions for borrowers recently, and generous programs to support first-time buyers, the rate of home ownership in Sydney continued to decline. The share of Sydney dwellings owned outright or with a mortgage fell to 61.1 per cent, down 1.2 percentage points since 2016. That compared with a small improvement in the nationwide rate of home ownership which edged half a percentage point higher to 66 per cent in the same period.

The census revealed another more immediate housing-related challenge – a surprisingly high proportion of Sydney households experiencing mortgage and rental stress.

Despite official interest rates of virtually zero when the census was collected last August, one in four home borrowers was paying more than 30 per cent of the household income on mortgage repayments in seven Sydney local government areas: Burwood, Canterbury-Bankstown, Fairfield, Strathfield, Cumberland, Parramatta and Georges River. (Those spending more than 30 per cent of household income to service a mortgage or pay rent have traditionally been defined as being in housing stress, especially households among the lowest 40 per cent of earners.)

Loading

Monetary policy has shifted dramatically since census night. The Reserve Bank is expected to hike interest rates for the third month in a row today. If market predictions are correct, the benchmark cash rate will be lifted 0.5 percentage points to a three-year high of 1.35 per cent. Many forecasters think official rates are on their way to 2.5 per cent, or higher, by early next year. This will inevitably result in much bigger repayments for home borrowers across the city.

Most of those with a mortgage will be able to comfortably absorb the higher costs. But the census data suggests many highly leveraged home borrowers in Sydney’s mortgage stress hotspots will come under significant financial pressure due to the rapid change in borrowing conditions.

The census also showed a high proportion of tenants in many Sydney districts were under financial pressure due to rental costs. Almost half of all renter households in Fairfield Council are paying more than 30 per cent of household income to pay the rent. That share is above 40 per cent in Canterbury-Bankstown and Liverpool councils.

These census findings demand policy responses.