The nation’s Treasurer, Scott Morrison, recently came under fire in an interview at the International Monetary Fund’s headquarters in Washington, D.C. when he said there was “no evidence” the Australian property market was overvalued outside “arguably some pockets if x and y and z happened, and x and y and z [have] not happened.”
Many Australians, including Taj Singh, co-founder of First Home Buyers Australia, said these comments highlight just how out of touch the government has become in regards to home ownership, and in particular, the dwindling number of first home buyers across the country.
“They don’t know how hard it is for a first homebuyer to actually purchase a first home, especially in Sydney and Melbourne where housing affordability has just gotten worse and worse for first home buyers,” said Singh.
More than 50% of Australians don’t own their own homes, and with housing prices continuing to rise beyond the median earning capacity of Australians, this percentage is likely to increase in the coming years. According to official figures from the Australian Bureau of Statistics (ABS), first homeowners make up just 13.4% of all owner-occupiers in Australia. In NSW, that figure drops to just 8%.
“Because first home buyers are a small proportion of the market... [they’re] not being mentioned by politicians,” Singh said. “The fact that they haven’t even implemented any reforms since they came into government just goes to show that first home buyers are forgotten to them.”
Further debunking Morrison’s assessment, Shane Oliver, chief economist at AMP, said there’s “mountains” of evidence that the Australian housing market is overvalued. Oliver said the nation’s house price-to-income ratios were well above those seen in other countries.
“For example, the average house price-to-income ratio in Sydney is something like 12 times. In Melbourne, it is about 10 times. In American cities, it is about three-and-a-half to four times,” said Oliver. When examining house price-to-rent ratios for houses, the gap is even wider—around 37 times, depending on how it’s adjusted.
Singh and First Home Buyers Australia have called for the government to acknowledge the nation’s housing affordability issue and implement reforms. A good place to start, Singh believes, would be negative gearing. But unlike the Labor Party’s policy to limit negative gearing to new properties, First Home Buyers Australia is advocating for less “erratic” changes.
“For existing property, negative gearing should only be 50 per cent deductible, and not 100 per cent deductible. This means it won’t have that erratic effect [the Labor Party’s] policy could have had on the property market,” Singh said. “Then we are saying 100 per cent negative gearing deductibility should remain for new homes because new homes increase supply and increased supply helps property prices.”
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