Housing Affordability and Housing Investment Opportunity in Australia (eBook)

Dr Karamujic obtained his PhD in Finance from La Trobe University, Australia. He has held academic positions as Professor in the School of Economics and Business at the University of Sarajevo and as Senior Lecturer in Property and Finance at the University of Melbourne, Australia. He also has more than 15 years' professional experience in banking, risk management, financial and economic analysis and modeling, financial regulation and governance.

Cover 1
Half-Title 2
Title Page 4
Copyright Page 5
Dedication 6
Contents 8
List of Figures 12
List of Tables 13
Acknowledgements 15
List of Abbreviations 16
1 Introduction 19
1.1 Background 19
1.2 Objectives 21
1.3 Outline 23
2 Housing: Why Is It Important? 26
2.1 Introduction 26
2.2 Housing trends 27
2.3 Governments and housing 35
2.3.1 Housings regulation by state/territory governments 35
2.3.2 Housing taxation 37
2.3.3 Provision of public housing and development land by state and territory governments 42
2.3.4 The housing-related functions of local government 43
2.3.5 Housing assistance 46
2.4 The emergence of the housing affordability problem 48
2.4.1 National Affordability Housing Agreement 52
2.4.2 National Rental Affordability Scheme 52
2.4.3 Housing Affordability Fund 55
2.4.4 First Home Owners Boost 55
2.4.5 First Home Savers Accounts 56
2.4.6 Are these new programs sufficient to make a change? 56
2.5 Why is housing affordability important? 57
2.6 Conclusion 62
3 Major Reasons for an Increase in the Number of Institutions Offering Home Loan Products and in the Number of Home Loan Products Offered in the Australian Home Loan Market 64
3.1 Introduction 64
3.2 The size, composition and changes in both total and home lending in Australia 65
3.3 Consequences of the two most recent rounds of financial system deregulation 66
3.4 High-level trends in interest rate and property prices 69
3.5 Recent changes in the typical borrower’s behaviour 71
3.6 Conclusion 71
4 Introduction to Contemporary Residential Mortgage (Home Loans) Lending Products 73
4.1 Introduction 73
4.2 Home loan products by type of offering 74
4.2.1 Financial packages 75
4.2.2 Stand-alone Home Loans 79
4.3 Home loan products by major functionality 79
4.3.1 Standard Variable Rate Home Loan (SVRHL) 81
4.3.2 Basic Home Loan (BHL) 82
4.3.3 Introductory (Honeymoon) Home Loan 82
4.3.4 Offset Home Loans 83
4.3.5 Line of Credit (LOC) Home Loan 85
4.3.6 Standard Fixed Rate Home Loans (FRHLs) 87
4.3.7 Reverse Home Loans 88
4.3.8 Islamic Home loans 89
4.4 Home loan products by major purpose type 92
4.4.1 Owner-Occupied Home Loans 92
4.4.2 Investment Home Loans 93
4.4.3 Construction Home Loans 93
4.4.4 Refinance Home Loans 93
4.4.5 Upgrader Home Loans 94
4.5 Home loan products by distribution segment 94
4.5.1 The direct channel 95
4.5.2 The third party channel 96
4.6 Home loan products by interest rate repayment structure 97
4.6.1 Interest Only (IO) Home Loans 98
4.6.2 Principal and Interest (P& I) Home Loans
4.7 Home loan products by conformation status 98
4.7.1 Conforming (prime) Home Loans 98
4.7.2 Non-conforming (sub-prime) Home Loans 99
4.8 Conclusion 102
5 Contemporary Housing Affordability Measures 106
5.1 Introduction 106
5.2 Home loan affordability measures 112
5.2.1 The New South Wales Government’s Centre for Affordable Housing, Affordability Index (NSWCAHAI) 114
5.2.2 The Real Estate Institute of Australia, Home Loan Affordability Indicator (REIAHLAI) 115
5.2.3 The Commonwealth Bank of Australia – HousingIndustry Association, Housing Affordability Index(HIA-CBA HAI) 115
5.2.4 The BIS Shrapnel, Home Loan Affordability Index (HLAI) 117
5.2.5 The National Affordable Housing Agreement, Housing Affordability Index (NAHAHAI) 117
5.2.6 The ABS Measure of Housing Affordability (ABSMHA) 118
5.2.7 Summary overview 120
5.3 Housing price-based affordability measures 126
5.3.1 Sales by Price Segment, Housing Affordability Indicator (SPSHAI) 127
5.3.2 Affordability and Available Stock, Housing Affordability Indicator (AASHAI) 127
5.3.3 House price to household income ratios 128
5.3.4 House price-to-rent ratios 130
5.3.5 Accessibility/Deposit Gap Method (ADGM) 131
5.3.6 Homeownership Rates (HOR) 132
5.3.7 Summary overview 133
5.4 Rental affordability measures 134
5.4.1 Traditional Consumption-Based Measure (TCM) 139
5.4.2 The National Housing Strategy Measure (NHSM) 139
5.4.3 Net Affordability Measure (NAM) 141
5.4.4 Net Equivalent Affordability Measure (NEAM) 142
5.4.5 Private rental affordability for all households 143
5.4.6 Private rental affordability for low-income households 143
5.4.7 Rent-to-Mortgage Payment Ratio (RMP) 144
5.4.8 Residual Income Measure (RIM) 145
5.4.9 The Canadian model (CM) of “core housing need” 146
5.4.10 Summary overview 147
5.5 Conclusion 152
6 The Geography of Housing Affordability and Housing Investment Opportunity: A Case Study of Melbourne 155
6.1 Introduction 155
6.2 Brief review of the literature 158
6.3 Data and methodology 161
6.4 Results and discussion 166
6.4.1 The geography of Melbourne’s affordability problem 166
6.4.2 Which market segment represents a better investment opportunity? 177
6.5 Conclusion 180
7 Conclusion 182
Notes 188
Bibliography 199
Index 208