One year. That’s how long it has been since I last wrote about the absolute disaster that is Australia’s housing affordability crisis for Fairfax. Going from the feedback I received last time, what I wrote was either an ‘all too-real observation of what has made life-long renters of thousands of young Australians’, or a ‘typical whinge from the perspective of an entitled generation’. My optimistic girlfriend said I should be happy that it got people talking. But clearly talking isn’t enough.
One year on, we have a new government, and the opportunity for change. Successive governments have implemented, tweaked, and mostly maintained ineffectual and sometimes absurd policy concerning real estate in this country. And investors, largely wealthier Australians, continue to exploit these tax breaks such as negative gearing, at the expense of first home buyers. Young Australian families generally remain unaware these policies are undoubtedly responsible for homes being so absurdly expensive, because, honestly, property tax is boring, unless you’re making money from it.
And unfortunately, the recent change of government has not brought with it a change of real estate policy. My optimistic girlfriend reckons it might be tackled in the May budget. I told her I’m not sure Joe Hockey was referring to property investors when he declared that "the Age of Entitlement is over". He was probably talking about all those ABC employees who have had it too good for too long.
In the last year, we saw some ridiculous records. According to RP Data, Australian house prices have risen 9.5 per cent. In the December quarter of 2013, first home buyers made up just 12.5 per cent of owner-occupiers. That’s the lowest figure since the Australian Bureau of Statistics started to monitor this data, and a long way from the average of 19.9 per cent. Despite the low interest rates that apparently our generation should count our lucky stars for, the percentage of loans taken out by first home buyers dropped to 12.7 per cent in 2013. Again, that’s well below the average of 18.5 percent for the previous ten years.
When first home buyers do borrow, they’re signing up for record levels of debt. Something even the RBA has concerns about. Historically, the house price to income ratio has been used to determine how expensive homes are in Australia. When my parents bought their first home, the cost of the average house was roughly three years of the average wage, or 1:3. Today, it’s closer to 1:7.
Basically, due to unscrupulous policy by yet another out-of-touch government, young Australians can’t afford homes, and they are either borrowing way too much to get into the market, or slowly accepting a life of renting. My optimistic girlfriend reckons people will only stand for this for so long before politicians are forced to act. I’m worried the powers that be have us more focused on Schapelle Corby’s dwellings than our own.
Since I last wrote, foreign investment continued to go unchecked, thanks to the still redundant Foreign Investment Review Board. I don’t want to feed xenophobia in this country or on Facebook. That’s one thing this government has policy for. But I will point out that Credit Suisse estimates that Chinese buyers purchase 12 per cent of new homes in Australia. And that’s expected to grow. Because while in the last year countries like Canada have tightened foreign investment laws, here in Australia we continue to welcome foreigners with big wallets to our shores (presumably, as long as they don’t arrive by boat).
Frustratingly, first home buyers are competing with foreign investors, many of whom can borrow at lower interest rates, fuelling our overheated housing market. My optimistic girlfriend hopes more foreigners buying homes in this country will help further diversify our culture and lead to more jobs in the building industry. I’m worried that if young Australians wake up to this ridiculous international inflation of Australian house prices, they’ll point the finger at foreign investors, instead of the successive governments at home that have purposely orchestrated this market distortion.
Some will argue I’m being too simplistic, and that there are a number of other factors that have lead to our overheated housing market, and they’re right. Relatively low unemployment, high incomes and low interest rates have all played their part. A morally bankrupt and virtually unpoliced real estate industry full of under-quoting, over-promising, quick-talking shysters isn’t helping either. And a generation of renters who feel powerless has lead to people accepting 'this is just how it is'. However, these factors don’t erase the necessity for policy reform.
It’s been one year since I last wrote about this issue. Despite all odds, I’ve subsequently bought a house with my optimistic girlfriend and entered into this system I’m so utterly frustrated with. I'm lucky to be able to afford a house. I know many of my close friends have given up on the idea completely. I don't blame you. Despite having bought myself, it hasn’t changed my opinion one bit. I continue to tell anyone who will listen; housing is too expensive in this country, federal real estate policy is to blame, and an entire generation is being callously priced out of owning their own home. But clearly talking isn’t enough.
Senior Editorial Producer – The Project
The opinions expressed in The Side Project blog do not necessarily reflect those of The Project or the Ten Network.