It’s the ongoing fly in the proverbial ointment when it comes to our housing market – the Great Australian Dream has largely become unattainable for younger generations, with some suggesting they will never have the opportunity of home ownership.
Various ideas for policy reform are continually floated from different levels of government and many suggest today’s low interest rate environment could provide some relief.
However, incentives to make the purchase of housing a reality could actually be adding to the underlying problem, by increasing competition in select pockets of our markets and putting upward pressure on restricted supply.
A mixed bag of consumer sentiment
The Housing Affordability Sentiment Index (HASI) 2014 reported that while 60% of Australians believe they are better off financially in terms of household savings and Gen Y are increasingly optimistic about their fiscal future, many are still reliant on mum and dad to get a foot on the property ladder, with 16% receiving a parental cash injection to buy their first home.
Sixty three per cent of those surveyed believe housing affordability is continuing to deteriorate, and 59% anticipate that this will be an ongoing issue in years to come.
More than half of respondents believe Australian homebuyers are facing greater challenges when it comes to breaking into the property market than their overseas counterparts. Generally, we are feeling more skeptical about the market now than in 2013.
Not surprising really given the undeniable spike in activity witnessed over the last 12 months, as equity laden homeowners and property investors delight in the RBA’s continuing conservative stance on interest rates and the banking industry’s subsequent scramble to win new business.
Is real reform a pipedream?
Throughout the history of our housing markets, governments claiming to have Australian homebuyers’ best interests at heart have introduced numerous legislative changes.
It all started with negative gearing, which many commentators suggest signalled the demise of affordability by opening the floodgates on investor activity and creating cutthroat competition in certain pockets of the property sector.
Then came the capital gains tax concession and first homeowner grant, with the latter being credited with saving Australian real estate at the height of the 2008 GFC, even as overseas property prices crashed and burned.
The fact is, all three policies have contributed to the current climate and indeed, created micro-bursts of competition among buyers at various times that have added to the inequity we see today between average household income and the average debt required to service a mortgage on most real estate.
Last month, Independent senator Nick Xenophon weighed in on the affordability debate and suggested yet another reform that experts say is only going to make the situation worse.
His idea? Allowing first homebuyers the opportunity to access part of their superannuation savings as a housing deposit. On the surface, his alleged intention to help prospective purchasers get a leg up might seem genuine.
However, Australia’s economic boffins argue that the only people who would benefit from the inevitable competition injection such a move will create are existing homeowners, real estate agents and property developers.
Are our pollies part of the problem?
Skeptical of the true agenda around suggested affordability reforms, such as that recently proposed by Xenophon, a few researchers have been doing some digging into the housing interests of Australian politicians.
Interestingly (and I guess not surprisingly), housing researchers Paul Egan and Phillip Soos and former strategy consultant Lindsay David found that between the 226 members of parliament in 2013, 563 properties were owned at a combined value of around $300 million. That equates to an average of 2.5 properties (give or take) per member. Hmm….
While average home ownership rates sit at around 70 per cent in Australia, 91 per cent of our Senators own real estate and 95 per cent of members in the House of Representatives have property holdings.
It seems one thing the Libs and Coalition agree on is the value of a property portfolio. Of course this has led many media commentators to question whether such an obvious conflict of interest will ever see reforms introduced by the government to genuinely give potential homebuyers a leg up the property ladder, or to merely increase the value of their own assets.
So, housing reform for public interest or self-interest? When it comes to protecting their own financial position, I think we all know where our well-paid politicians stand.
Is there an answer?
Housing affordability is definitely becoming a social issue for Australia’s younger generations. Given that our property loving (baby boomer and Gen X) politicians have so much of their own retirement funding at stake though, it’s difficult to imagine they will be scrambling to find a real solution to this issue any time soon.
Of course the youth of today, who are personally experiencing the affordability debate on the frontline, will one day become the drivers or property prices themselves. Perhaps then we will see real change in the sector. But then, with a helping hand from mum and dad to get their own slice of property nirvana, they might want to see Australian house prices continue to move onwards and upwards too.
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).