Even though Australia is considered among one of the most developed countries it has been having a serious problem in the recent times with housing affordability. Australia is not building enough affordable houses to meet the demands of its own citizens, let alone the people who come to the country temporarily. This has been not only because of the fact that overall living expenses in the country have gone up but because of increasing interest rates which means that lesser people find it possible to afford the purchase of a home.

The official figures present a grim picture. According to the available information, increasingly fewer housing construction projects saw the commencement of work. There has been a fall of 3.3% as compared to the quarter that just passed. Shane Oliver from AMP Capital Investors has bad news to share. Oliver tells that while there is some demand, the supply in the housing sector has been rapidly diminishing since the onslaught of increasing interest rates. Home construction in Australia has become ill affordable. The degree of affordability has never before been so low.

Oliver says that the country is building anywhere between 30,000 to 40,000 houses short of what is actually required to sustain current levels of housing access. This is because of high rates of interest with people find it harder and harder to even commence the construction work of their homes. Completing the construction work is a complete new story. To a certain extent the blame for this fiasco also lies on the carelessly planned and improperly implemented policies of the Federal, State and local governments. Higher interest rates are also coupled with irrational taxation regimes.

In a number of cases, the taxes are so high that people are increasingly paying a huge chunk of their income as property taxes. City councils are increasing taxes and people who plan to buy their first home are hit really hard. In Brisbane for example, the tax structure for apartments was recently revised. In 2009, experts say that some properties may be subject a 700% tax increase. The Lord Mayor of Brisbane however disputes this and says that even in the highest case the tax would not go up by more than 300%!

This kind of policy has decreased the incentive of having own home but the increasing rentals still drive the demand. On the other hand supply is dismal. Getting a home building approval is a really complicated task whereas in a number of countries no such thing as a home building approval has ever been heard of. The housing sector of Australia has seen much better times and has the potential to grow at a faster pace. What is required is the popular, political and entrepreneurial will to get the sector back in order.  Failing this, a serious setback in the overall growth rate of the Australian economy may eventuate.