Shadow Treasurer Chris Bowen said that Australia has become a nation that can no longer afford to house its own children.
In a speech given at the McKell Institute in Melbourne, Bowen said that rising property prices were barring young Australians from owning their own homes. Consequentially, many young entrepreneurs cannot borrow equity from their homes to invest in innovative start-ups.
Overall homeownership in Australia is at a 60-year low, with less than half (42%) of Australians aged 25-34 owning their own homes in 2012. In contrast, 62% of Australians aged 25-34 owned their own homes in 1982.
“This is not surprising given that over the last 25 years young people have gone from having to pay just five times, to now having to pay up to 15 times their annual income to purchase a new home,” Bowen said. “[The fact that] young people [are] unable to crack into the housing market strips them of one of the most fundamental wealth drivers through their lifetime.”
According to the Grattan Institute, a non-partisan think tank, declining homeownership rates for young people means they now have less wealth than people of the same age eight years ago.
Bowen also repeated Labor party attacks on the negative gearing system, which he said continues to provide very generous tax concessions to property investors and zero assistance to first-time home buyers. The Labor Party’s policy to limit negative gearing to new properties would put first-time home buyers on a more level playing field with investors. It would also help stimulate new construction, and together with the capital gains tax reform, add $37 billion to the budget over the next 10 years.
The Labor Party’s policies were roundly criticised by Prime Minister Malcolm Turnbull and Treasurer Scott Morrison and the Coalition, who warned that such policies would smash house prices across the country.
The truth is, with house prices rising faster than incomes, it’s becoming more difficult for young Australians to save for a deposit. This is exacerbated by the high cost of living in Australia’s major cities and the greater tendency of young people to pursue tertiary education (with its accompanying student loan debt).
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