FOR AUSTRALIANS UNDER the age of 35, home ownership – particularly in metropolitan and outer metropolitan suburbs – has become almost impossible.
The great Australian dream has steadily morphed into the great Australian nightmare.
Couch surfing, rental serfdom, living with parents and in-laws for decades, gargantuan debt and mortgage stress are now the norm.
A recent survey of more than 1,000 Australians by Mortgage Choice and Core Data has revealed:
- 53.9% of Australians believe that traditional home ownership (a free-standing home in the suburbs) is no longer relevant;
- 70% believe that traditional home ownership is out of line with reality;
- 87.3% believe that traditional home ownership is increasingly difficult due to the rapid escalation in property prices; and
- 62.3% believe that only those with “with money” (surplus capital) can realise the dream of traditional home ownership.
A key driver of housing unaffordability is supply and demand. According to a 2015 Senate References Committee report, 'Out of Reach? The Australian Housing Affordability Challenge', the annual supply of new dwellings in Australia has not increased since the 1980s.
The 2018 Grattan Institute report, 'Housing Affordability: Re-imagining the Australian Dream', supports this claim, arguing that the number of dwellings per Australian resident has declined in the last decade. Similarly developed economies – including Austria, Denmark, France, Germany, Ireland, Netherlands, New Zealand, Norway, Switzerland, the UK and the U.S. – have experienced trends in the opposite direction.
Other drivers of housing unaffordability include record low-interest rates, irresponsible commission driven lending, rapid population growth, speculative overseas buyers, negative gearing and capital gains concessions.
As median house prices have soared – in some cases doubling in just eight years – successive Coalition governments have refused to meaningfully intervene, fearing that if home equity were to decline even marginally, a backlash among older home owning voters would follow.
... is terrified of taking serious steps to tackle housing affordability… We should not foster a society where the largest determinant of your future living standards is whether or not your parents bought a home in metropolitan Sydney 30 years ago. But with a convoluted array of capital, taxation and planning distortions that is exactly what we are doing.
Fixing this situation will require political bravery, but if done right, the Coalition Government could tap into millions of aspirational, politically unaligned young Australians desperate for a feasible path to home ownership, just as Sir Robert Menzies did decades ago.
Former Coalition leader, John Hewson, has similarly broken ranks with the Coalition's current policy aims, characterising stratospheric home prices as akin to “intergenerational theft”. Rather than continuing with the status quo, he has called for a reduction in benefits investors can receive via negative gearing and capital gains concessions.
Hewson told ABC's former program, Lateline:
"It will work in the direction of slowing the investor demand for housing, which has been a major reason I think demand has outstripped supply and, in those circumstances, it is something that should be done."
"The moment that it intrudes on the marketplace and stops young families from buying the house, that’s not ideal. And that’s what’s happened in this moment when interest rates have gotten so low."
But tax reform is unlikely.
Prime Minister Scott Morrison has argued that the current macro-prudential policy settings are sufficient to deal with the inflated metropolitan property market. He has pointed to restrictions on interest-only loans, which have contributed to a modest downturn in median property prices. Morrison has also attacked the Labor Party’s intended reforms to negative gearing and capital gains concessions, labelling them “poor judgment”.
Morrison has also gone on the public record supporting housing affordability and home ownership:
Home ownership is a positive for the Australian economy, our society and the nation’s finances. If Australians are able to affordably own their own home and achieve housing stability, this can set them and their children up for success and reduce risks of welfare dependence. Australian homeowners who are not encumbered by large housing debt as they enter retirement will have their pension or superannuation incomes go much further to meet their many other costs of living.
How might housing affordability be improved?
A combination of real wage growth, targeted land release and reforms to negative gearing and capital gains concessions would deflate median prices.
Contrary to the suggestions of former Prime Minister Malcolm Turnbull, the "bank of mum and dad" is not a solution to the housing affordability crisis. It only creates a divide between those who have benefactors and those who do not.
Although the Coalition may believe that its current hands-off housing policy will satisfy its predominantly older homeowning voter base, it may ensure the near-total alienation of Australians under the age of 35.
If this is correct, this points to the Coalition losing government at the 2019 Federal Election.
Blake Pepper has completed a Bachelor of Commerce with a major in Accounting and Bachelor of Laws (Honours)/Diploma of Legal Practice. He has an interest in Health, Environmental and Equity Law as well as developments in Economics and Politics. You can follow him @thepepsinator.
Dr Glen Anderson researches in the areas of international law, equity, company and property law. He has formerly taught Australian and international politics at Macquarie University.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License
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