Home ownership is central to the great Australian dream. A home is not only a means of shelter, but the crucible from which personal development, family relations and community bonds spring forth. For many Australians, it is a tangible way in which they can share in the wealth of the nation.
A decade ago, social researcher, Jeanne Strachan, reflected on an emerging concern about housing: “Young couples today are the first generation since the war to face the reality that they often can’t obtain, even with two full-time workers in the house, what their own parents saw as a fair and reasonable reward for their hard work.”
Strachan observed a growing sense of pessimism about home ownership: “Many young couples have an ingrained belief that it is not ‘right’ to raise children in a rented home. They make a very strong emotional link between the goals of parenthood and home ownership. They recognise that before the birth of their first child they will bath have to work to fulfil their home ownership dream.”
There are five worrying trends.
First, housing has become less affordable: Median house prices have increased from around three times average household earnings in the 1990s to around five times today; any recent improvement in affordability was the result of interest rate cuts, which are now being reversed; and the deposit required by first home buyers has reached record highs.
Secondly, home ownership is being delayed: The proportion of Australians under 35 who owned their own house declined from 44 per cent in 2001 to 38 per cent in 2008.
As is full home ownership: The proportion of Australians aged 55 to 64 with mortgages has increased from 13 per cent in 1996-97 to 30 per cent in 2007-08.
Fourthly, there has been a substantial expansion of the spatial gap between the haves and have nots: 27 per cent of dwellings in different population centres were found to be ‘unaffordable’ in 2006, while none were in 2001.
Finally, rental affordability has fallen significantly: The ratio of rents to average weekly earnings has risen to its highest levels since the late 1980s. In June 2009, 418,000 individuals and families were paying more than 30 per cent of heir income in rent after receiving Rent Assistance; and 129,000 of these were paying more than 50 per cent of their income.
Housing prices in Australia are now 29 per cent above the long term trend. According to an international survey by The Economist magazine, our prices are 56 per cent over-value.
Prior to the 2007 election, Tanya Plibersek, claimed that “average prices had risen to seven times the average wage under the Howard government.” They are now nine to ten times the average wage. Labor’s policies have made housing less affordable for home buyers, whether they are wishing to purchase a house or pay off the mortgage.
In 2007, Tanya Plibersek asserted that “there won’t be an increase in the First Home Buyers Grant, because we have seen from experience what happens when you provide a grant like that – or increase it – is that it goes straight into the pocket of the seller.”
Subsequently the Rudd government doubled the grant and house prices spiked. Buyers have been caught twice: first through increased house prices, and now by rising interest rates as the Reserve Bank seeks to avert higher inflation. Every dollar that first home buyers received in grants will be repaid multiple times as interest rates rise. In recent months, mortgage delinquencies have increased, particularly in New South Wales, Queensland, Victoria and South Australia.
Many economists have been critical of the scheme, and the Rudd government’s increase, arguing that it stimulated demand but did nothing to the supply, forcing up prices for the very people it was supposed to assist.
And the Rudd government’s Home Buyers Savings accounts were so complex that few financial institutions offered them, and few people utilised them.
Secondly, the Government relaxed the foreign investment rules, spiking a flood of overseas buyers into the Australian housing market until it was forced to change the rules.
A combination of factors has contributed to the high prices for housing. These include the shortages of land, a growing number of heads of households, the ageing population and the Rudd government’s decision to significantly increase in the immigration program.
In particular, two issues, population and land supply, must be addressed.
In 2007-08, 173,290 people permanently migrated to Australia. In addition, there were another 544,000 temporary migrants, excluding the five million of visitors. That’s close to three-quarters of a million extra people residing here a year.
According to the Australian Bureau of Statistics, Net Overseas Migration contributed 60.6 per cent of Australia’s population growth in 2008, compared to 39.4 per cent contributed by natural increase.
Our roads are congested, our public transport overcrowded, our water supply inadequate, and our amenity under threat.
Echoing Jeanne Strachan’s observations from a decade earlier, the Urban Development Institute predicts that “the newly married young couple, the young family with children, the medium-income single person, and the teachers, nurses, and police will have few opportunities to purchase in the new high-cost, unaffordable Australian city unless steps are taken to make land more affordable.”
According to Demographer, Graeme Hugo, population growth has accounted for around three quarters of household growth in Australia since 1961.
It is time we addressed these changes, not in a piecemeal fashion, but as part of a national discussion about population. Planning, infrastructure, transport – even health, education and policing policies – share population as a critical element.
That is why the Coalition has announced a population policy. Within three months of taking office, a Coalition government would re-constitute the Productivity Commission as the Productivity and Sustainability Commission and task it with an annual independent review of Australia’s infrastructure needs for short, medium and long term projected population numbers. Unless the Productivity and Sustainability Commission was reasonably satisfied that future infrastructure bottlenecks were being addressed, a Coalition government could be expected to limit the overall immigration intake.
This response will address some of the demand issues. However, supply remains significant. The housing shortage is growing, not contracting.
Some 40,000 families cannot get into public housing in Victoria alone. Tens of thousands of people are living in caravan parks and tents.
The structural barriers to new housing must be addressed urgently. Short term palliative measures, such as the Home Buyers Boost do nothing to solve the problem. Indeed, they add to it.
Real reform of land supply, planning and infrastructure relies on tailoring policies to success and failure. Some jurisdictions have made progress with planning reforms. The Western Australian government, for example, has a goal of ensuring that the majority of single houses are planning approval exempt.
But others are still adding bureaucracy and costs to the process, as we have seen recently in New South Wales.
A Coalition government will look to establish benchmarking policies in the areas of land supply, planning and infrastructure to ensure that current and future housing needs are met in a manner that is both timely and mindful of community concerns.
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