Housing affordability inquiry avoids change for change’s sake, but falls through the deposit gap

Australian Institute for Progress Executive Director Graham Young has supported the House of Representatives Economics Committee report on Housing Affordability for being much better than it might have been.

“The analysis by the majority is fundamentally sound, and it avoids the mistake of thinking that housing affordability can be fixed by introducing more Commonwealth Government regulation and tax, as advocated in the minority report.

“But it misses the real problem for first home buyers, which is the deposit gap. And should have recommended first home buyers have access to their superannuation savings to help bridge it.”

Mr Young said that AIP research concurred with the Treasury submission to the committee that housing affordability has been stable for the last 20 years, and high house prices are largely a result of lower interest rates, higher population growth and restricted supply of new stock.

“While repayments in most markets are as affordable as they have been since 1993, saving for a deposit has become a very long term project, discouraging first home buyers from entering the market.

“For example, in Sydney, it now takes two-thirds more time to save a deposit than it did 23 years ago. In Melbourne it is three-quarters more, while in Brisbane it is just less than one-third.

“At point 2.86 the committee refers to the obvious solution to this problem – allowing a first time purchaser to access their superannuation for the purchase – which would make the savings task manageable.

“While it leaves the door open for further consideration, a recommendation in favour of this solution should have been one of the major findings of this report.”

Mr Young said the current changes to the old age pension indicate just how important home ownership is as part of retirement planning, with the house a significant part of the asset pool supporting older Australians.

“Using access to their super to help younger Australians enter the housing market is a win for home ownership, and a win for well-being in retirement.”

Mr Young said that the committee was right to reject changes to negative gearing, or capital gains tax.

“The suggested changes are not affordability measures at all, because even the proponents do not suggest they will have much effect on lowering house prices.

“In fact they are a tax grab to fund favoured budget programs in other areas.

“Worse, the McKell Institute, the ALP’s own think tank suggests that the policy taken by Labor to the last election will not raise as much as Labor claims, so the higher tax policy fails at all levels.”

Mr Young said the committee should not be pilloried for recognising that it is the states who have the greatest role to play in housing affordability, because they have been restricting supply.

“Some of the most successful countries in the world, like the US and Germany, are federations, but they only work when the states properly address their responsibilities, which is not happening in Australia.

“The heat needs to be put back on them to perform, especially in an area where the Commonwealth has no tools to intervene.”