More tax, but no more affordability, in ALP housing policy

The inability of Labor’s Treasury Spokesman, Chris Bowen, to explain how Labor’s new housing  “affordability” policies could decrease house prices shows it is not about affordability at all, according to AIP Executive Director Graham Young.

“Mr Bowen couldn’t tell ABC’s AM program ‘how much heat’ the policies would take out of the market, referring Kim Landers to old modelling which does not take into account any of Labor’s new measures, and predicted little to no impact on prices from the old measures.

“Any measure which does not reduce house prices, or increase the ability of new home purchasers to buy a house, is not an affordability measure.

“The real problem in the housing market is not paying back the debt, it is affording the deposit.

“The reason first home buyers are finding it difficult to compete against investors is that most investors are using equity in their own house for a deposit, while the first home buyer has to save it.”

Mr Young said that the vacant dwelling tax was an idea borrowed from Vancouver in Canada, and there is no evidence that it will have any effect on dwelling prices.

“Along with Sydney, Vancouver is one of the most expensive cities in the world to buy residential real estate, even though it has no negative gearing and now a vacant property tax.

“There are a lot of genuine reasons why someone might leave a property vacant – overseas travel, a holiday home, no suitable tenant – but these people will be hit by an additional land tax, with no appreciable effect on affordability.

“In Sydney, that would be a tax of $11,500 on the median house just because the owner wanted to exercise their legitimate property rights.

“Determining whether a house is vacant could also be an interesting exercise.”

Mr Young said there is confusion over what is causing house prices to rise.

“It is a combination of low interest rates, and high rents. If rates go down or rents go up, then house prices will respond positively.

“Labor’s changes to SMSFs’ and overseas investors’ abilities to invest in the market will mean there is likely to be upward pressure on rents, and first home buyers will receive a double whammy – high rents make it more difficult to save, and the required deposit just got bigger.

“The idea that the government can somehow cause an additional 55,000 houses to be built in the next three years is a nonsense.

“Total new dwelling commencements in the December quarter were 56,357. So the people who conceived of the NBN, Pink Batts and the BER, are suggesting they can increase housing output by 8% over the next three years, from a standing start, while taking a substantial number of investors out of the market.

“It won’t happen.”

Mr Young said that the only affordability measure which could make any real difference is copying another idea from Canada – allowing first home buyers, and select others, to use some of their superannuation savings for their deposit.

It relies on putting first home buyers on a more equal footing with other buyers by helping them to overcome the deposit deficit against investors, and second and further home buyers, not crunching prices, or increasing taxes.

“For some reason the opposition refuses to adopt this idea. I’m not sure why, but perhaps when you are looking to increase the tax take a policy which doesn’t increase taxes is not going to be high on your agenda.”