Housing affordability could see exodus of essential workers in Sydney and Melbourne

Nine.com.au9 April 2019

Tim Rose

Sydney and Melbourne could be faced with a shortage of essential workers because they are unable to afford to buy a home in the two cities, a new report has warned.

PwC's Deposit Gap Dilemma report, commissioned by Teachers Mutual Bank and Genworth Mortgage Insurance Australia and based on a CoreData survey of more than 1000 people, found the two cities could see an exodus of "key workers" without government intervention.

The report defined key workers as teachers, nurses, ambulance officers, paramedics, fire and emergency service staff.

An alarming 79 per cent of workers surveyed in those professions in Sydney and Melbourne believed home ownership was not achievable, with around a quarter looking to either relocate or even change careers.

And not without reason. According to the report, they would need to save for nine years in Melbourne and 12 years in Sydney just to have enough for a 20 per cent deposit.

"House prices would need to fall at least another 60 per cent in Sydney and 50 per cent in Melbourne to enable single key worker households to save a 20 per cent deposit within five years," the report said.

It also found key workers are making disproportionate sacrifices in order to afford their homes, with nearly half working overtime – a rate nearly double that of the general population.

A quarter of workers live with family or friends to save a deposit and 29 per cent are delaying starting family because of financial pressures.

Nine finance editor Ross Greenwood said the issue needed to be addressed or it would continue to "bubble away".

"The fact of the matter is, our cities have become unaffordable for the people who provide the essential services to those communities," he told Today.

"You can't live without them but then those people are finding they can't live in these major cities."

The report suggested eligible workers could be allowed to deduct some costs needed to buy an owner-occupier home, such as mortgage insurance or loan application fees.

Greenwood said state and federal governments could also provide other incentives to keep essential workers in the areas where they are needed, given the demand for health services is higher in densely populated inner-cities.

"Maybe one answer could be changing the tax rates for these people who provide these essential services," he said.

"Your problem then is who's providing an essential service and who's not? That's one of the problems.

"I'm wondering if people who provide these essential services should be given some type of allowance – which means the taxpayer has to help to fund them – to live close in our capital cities, where the cost of living is especially high.

"Something needs to be done, otherwise our cities may be short of these essential workers."

PwC Australia partner Jeremy Thorpe said government assistance had worked elsewhere.

"Key worker shortages are not unique to Australia's major cities," Mr Thorpe said.

"Overseas experience shows that governments can successfully halt the loss of staff in the education, health and emergency sectors by implementing programs to assist them in buying homes in metropolitan areas."

Georgette Nicholas, CEO and Managing Director of Genworth, said the consequences could be dire if key workers continue to be priced out of our major cities.

"We need to discuss and identify a range of solutions that help support key workers buy a home," Ms Nicholas said.

"The viability of essential education, health and emergency services in our two biggest cities could depend on it."

The report found housing pressures remained constant despite recent house price falls.

"Although house prices in Sydney and Melbourne have dropped by 12.3 per cent and 8.7 per cent from their respective 2017 peaks, the barriers to housing affordability for key workers are entrenched, and not significantly alleviated by price depreciation in this range," PwC reported.