Misguided oversupply of dwellings causes housing affordability problem in Sydney

Abstract

In most cases, an oversupply of dwellings will reduce house prices and therefore will make them more affordable. However, in Sydney, building more new housing supply causes an upward pressure on residential property prices and thus making home unaffordable. Even most parties such as politicians encourage more supply in an oversupply condition as an effort to ease or reduce exuberance house prices. This paper has revealed an evidence-based on series data of statistic that shows this situation. The finding is significant as empty houses or excess supply do exist and being held by investors to inflate house prices further while the government policy is to build more supply that could increase risks beyond financial risk. Understanding the demand for home ownership is therefore important to solve housing affordability problem.