From The Real Estate Conversation.
Shadow Treasurer Chris Bowen has spoken about the decline in Australia’s housing affordability, saying we are ‘a nation that can no longer house its own children.’
Shadow Treasurer Chris Bowen has delivered a passionate speech at left-leaning public-policy think tank, the McKell Institute, outlining the decline in the middle class in Australia, and listing worsening housing affordability as one of the main problems facing an increasingly pressured middle class.
In the speech, Bowen said Australians’ aspirations for home ownership were perhaps stronger than anywhere else in the world, but that it was becoming “an aspiration which, for far too many, is becoming a pipe dream.”
“Overall home ownership in Australia is at a 60-year low,” said Bowen.
“In 1982, 62 per cent of people aged 25-34 owned their own home. By 2012, this had collapsed down to just 42 per cent,” he said, citing the recent HILDA report.
People today are paying 15 times their annual income to purchase a new home, said Bowen, compared with five times 25 years ago.
“Young people unable to crack into the housing market strips them of one of the most fundamental wealth drivers through their lifetime,” said Bowen, concluding that housing affordability is at “crisis levels”.
Bowen says Australian who can not afford to buy their own home are cut off from an important source of capital, as many fulfill their aspirations by borrowing against the family home.
“For many it (home ownership) is a means to a broader aspiration, of access to the capital which is built into the family home,” said Bowen.
Bowen believes the government should be playing a greater role in improving housing affordability.
“At the Federal level, our tax system continues to provide very generous tax concessions to property investors and zero assistance to first home buyers,” he said, explaining that Labor’s changes proposed during the recent election campaign were designed to deliver more balance to home owner and investor incentives.
“Our policy to limit negative gearing to new properties puts first home buyers on a more level playing field with investors, provides a stimulant to new construction to add to supply and, together with capital gains tax reform, adds $37 billion to the budget over the next ten years,” he said.
The Property Council has welcomed the Shadow Treasurer’s commitment to make housing affordability a primary policy issue for the Opposition.
“Mr Bowen’s speech recognises a central tenet of the Australian success story: high rates of home ownership across all parts of Australian life are critical to social cohesion and economic security”, said Ken Morrison, Chief Executive of the Property Council of Australia.
Morrison said he agrees it’s important that the next generation is not priced out of the housing market, but said he disagrees with the Shadow Treasurer about the means to achieve this.
“While we have differences with the Opposition about its tax policy for housing, we take this speech as an invitation to explore other areas where we can encourage high rates of home ownership and increased housing supply,” said Morrison.
“Our concern about the Opposition’s current negative gearing policy is that it is not an answer to the worsening state of housing affordability,” said Morrison.
“The McKell Institute and the Grattan Institute are the Opposition’s biggest supporters of its negative gearing policy, but even they concede that the impact on house prices will be minimal. McKell argues it will curtail prices by a modest 0.5 per cent a year and Grattan argues a 2 per cent fall in the price of housing,” Morrison said.
Morrison said he believes that changes to stamp duties would be a more effective tool in addressing housing affordability.
“Our challenge is supply and finding sensible ways to reduce costs in the market place. It is worth noting that the biggest beneficiaries of high house prices are state governments who are collecting enormous stamp duty and land tax receipts,” said Morrison.
