The changes recently made to the Australian government, with the ousting of Tony Abbot as Prime Minister and Malcolm Turnbull taking his place, and Scott Morrison replacing Joe Hockey as Treasurer, are sure to shake-up the housing affordability debate.
Many political commentators are suggesting that the recent changes made to Australian parliament could be the best that’s happened to housing affordability in Australian for some time. This is attributed to the fact that the new Liberal leadership is expected to challenge the party’s previous argument that there was nothing wrong with the price of housing in Australia.
Earlier this year, the then Prime Minister of Australia, Tony Abbott stated that he hoped housing prices were rising. Shortly thereafter, the then Treasurer of Australia, Joe Hockey, said that first home buyers needed to get a better job if they were finding that Sydney property was too expensive. He also stated that people wouldn’t be buying homes there, in Sydney, if the market was over-priced.
A short time later, Sydney home prices reached a record median of $1 million. Melbourne followed suit and attained a record median of just below $670,000. Historically speaking, Sydney’s median home prices 15 years ago were below $400,000 and Melbourne was around $200,000.
Malcolm Turnbull and Scott Morrison are expected to make positive change to Australian housing affordability. In July 2015, Scott Morrison said that home prices in Australia had almost doubled the increase in wages over the last 25 years. At the same time, Morrison noted that there is a considerable lack of housing stock in Australia and home affordability was at the centre of Australian social problems.
Morrison said that more than 30% of an Australian family income was now required to pay mortgage repayments, and this breached what was considered as acceptable in terms of affordability requirements.
Turnbull has also noted similar problems. He has suggested that reform is needed to increase housing stock. In 2014, Turnbull noted during panel discussions on Australian housing that Australia’s housing affordability problem was associated with the fact that not enough dwellings were being built, even though there is plenty of land to build on.
New South Wales developers are suggesting that this is a government issue said Turnbull. Therefore, he feels that first home buyers will need the government to step-in and make changes to systems that are poorly planned and currently restrict property development.
In addition, it is also time for Australian political leaders to ‘take a stand’ on some tough problems and instead of providing quick-fix methodology to these issues, they need to provide long-term solutions that look critically at systematic problems with Australian housing.
Turnbull feels that Hockey’s suggestion to give first home buyers access to their superannuation is a bad one that will result in further problems later down the track. Academics have suggested that by implementing this solution the price of homes will be driven-up by more capital being in the market and the demand for housing becoming over-inflated.
According to the Property Council of Australia, the new Treasurer Scott Morrison has zeroed in on seeking a solution to Australia’s housing affordability problem. This has been done by establishing a partnership with all states to increase the supply of new homes in Australia.
Chief Executive of the Property Council, Ken Morrison recently said that he welcomed the Australian Treasurer’s focus on housing affordability and possible tax reform.
Now is the right time to target the supply of homes in Australia said Ken Morrison, as this is the real reason behind the rises in home prices in Australia. By increasing housing supply the heat will be taken out of the property market. Therefore, the Australian government needs to ensure that the level of home construction in Australia continues. One or two years won’t be enough said Ken Morrison.
The Australian Treasurer is currently working on looking how more land can be released in all states. This will be implemented by offering Australian states and territories incentives to reform their planning systems to promote the supply of housing based on a model that encourages infrastructure investment.
It is also time that issues such as taxes, which hinder growth and add to higher living costs are looked at critically said Ken Morrison. The worst of these being stamp duty.
Many political commentators say that it’s highly unlikely that Australian politicians will abolish or make changes to negative gearing legislation as many politicians own investment properties themselves. Plus, negative gearing saves the government millions in public housing costs, with private property investors providing housing for Australians at a far cheaper cost.
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