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Why is housing affordability not an election issue?; High cost of housing in Australian cities denies first home buyers the opportunity to buy
Topic Started: 26 Aug 2013, 06:26 PM (2,111 Views)
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Hopefully the market takes care of the problem sometime before my kids want to buy houses. Would be surprised if it doesn’t, as they’re only 2 and 6. But, I’ve been surprised for a long time already on this issue.

Is my faith in the market misplaced? Maybe, though I’d certainly have more faith in the market than the pollies to reduce Oz house prices.

Long bond yields overseas are rising, and there is only so long before the overseas funding costs of our banks rise enough that they’ll have to increase mortgage rates, assuming the RBA treads water. And if the RBA cuts again, that’ll be because the economy is turning further to crap.

Either way, rising rates or worsening economy spells downwards pressure for house prices.
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Mallard
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26 Aug 2013, 09:16 PM
Hopefully the market takes care of the problem sometime before my kids want to buy houses. Would be surprised if it doesn’t, as they’re only 2 and 6. But, I’ve been surprised for a long time already on this issue.
What "problem" dear guest unregistered? Prices are what they are.

Do y really expect prices to drop everywhere so your kids can afford a place? What sort of economic situation will it be if prices have dropped so much that prices have fallen massively?
Collecting desperation.
Ex-Bp Golly April 2 2015. "I see with a slight overshoot -70% [fall in Sydney house prices] as being well within possibility"
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Hey Kevin, what about that national housing crisis?

Joel Pringle | Aug 26, 2013

Housing was the “the barbecue stopper across Australia”, Kevin Rudd said. But in this election campaign the issue is dead. There are still many challenges, writes Joel Pringle from Australians for Affordable Housing.

In the lead-up to the 2007 election, Kevin Rudd referred to housing affordability as “the barbecue stopper across Australia”. Following victory in that election, the new Labor government followed through with new investment and policy innovation.

Sadly, this commitment was not to last. With first home buyers largely dropping out of the market and rents increasing by 23% over the last few years, backyard chefs across the nation have been left wondering why the issue has thus far been avoided by the major party leaders in this election campaign.

Negative gearing, where investors can claim loss-making property investments against other taxable income has long been a controversial feature of Australia’s tax system. However, often passed negative gearing stimulus through the 1999 introduction of the 50% capital gains tax discount that served to make loss-making property the investment du jour.

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The new tax regime elevates investment for capital gains over rental income, which to that point had been more-or-less equal (or tax neutral). This led to an increase in property speculation that not only ran up the price of housing throughout the following decade, but also put first home buyers at a further disadvantage compared with investors and is now flowing into steep rent increases.

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Negative gearing not only hurts housing affordability but is also incredibly expensive and fails to achieve the aim of helping renters by stimulating new construction. The best estimates are that negative gearing costs the budget around $5 billion a year, with over 90% of this funnelled into existing stock, thereby inflating prices and subsequently rents.

In recent years we have been reminded that house prices cannot increase ad infinitum. Whilst prices are currently taking a breather, rents are increasing to cover the high cost of financing new property investments. Australian rents have increased by an average of 23% over the last five years and whilst it seems counter-intuitive, this is directly related to the slowing of capital growth.

Without the benefit of capital gains, investors rely more heavily on rental income to cover the costs of their investment. The massive capital gains of the 2000s kept rents subdued for a while, but were ultimately unsustainable. Now that capital growth has slowed, rents need to catch up to cover the high cost of housing purchases.

These factors have contributed to a “new normal” for house prices and rents, at a level where many households are finding themselves in rental stress for the first time, regardless of rising incomes. If house prices remain high then there will be a permanent shortage of rental properties available at low rents.

If we accept that housing should remain affordable to people on low incomes, then more direct intervention from the government is required. But we have failed in the various strategies here too.

Since the 1970s, governments have prioritised the provision of private market subsidies over direct involvement in the construction of new homes. By the early 1990s, housing demand subsidies had become the largest component of housing assistance provided by governments.

This has resulted in under-investment in social housing. Waiting lists have grown to the point that some eligible applicants are now being told that they will be on waiting lists for decades, if they have the good fortune to be housed at all.

At the same time, Commonwealth rent assistance — the income supplement intended to replace growth in social housing — has been allowed to diminish over time because it is indexed to the consumer price index, while rents have trended well above CPI for a number of years.

Some hope lies in a recent innovation called the National Rental Affordability Scheme. NRAS subsidises private investors in building new housing, which is then leased at 80% of the market rent for a period of 10 years.

NRAS fulfils the promises that negative gearing has failed to live up to. Like negative gearing, it is a subsidy for private investors. But it encourages the building of new stock, delivers properties at below-market rents without compromising on property standards and is targeted to renters on low incomes.

A product of the Labor Party, the unwillingness to fund this as an ongoing program rightly calls into question the current government’s ongoing commitment to housing affordability.

There is no single solution to the housing crisis, there are a number of policy levers that, if properly designed, can be complementary. The current problem is that we are failing on all fronts.

With an election just weeks away, the real challenge is a polity that pays lip service to the problem but fails to offer substantive solutions. The Labor Party respond by touting past programs and failing to commit to a future for current ones, the Coalition leader has tried to shift responsibility to the states. The only minor party to offer any response of substance has been the Greens, who seem to their credit to have adopted many of the recommendations made by the community sector peak bodies.

This situation is not sustainable, and sooner or later the housing crisis will have to be addressed. The longer we wait until that happens, the greater the current crisis will become, and the more our political leaders will be squeezed by community distress and deeply entrenched barriers to reform.

Read more: http://www.crikey.com.au/2013/08/26/hey-kevin-what-about-that-national-housing-crisis/
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Foxy
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Zero is coming...

Where do they pull this shit from???
Houses are never unaffordable.
If they where unaffordable people could not buy them.
This is just pure drivel.
Peter from Perth
Some people are just plain weird.
:pop:
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Perception of housing affordability on the rise

Posted on Monday, September 23 2013 at 3:06 PM

Generation Y first homebuyers are driving positive sentiment when it comes to housing affordability.

The annual realestate.com.au Housing Affordability Sentiment Index (HASI) shows easing household expenses and debt, combined with increased household savings, is pushing first homebuyers into the market.

Around 46 per cent of the market looking to buy are now first homebuyers, compared with 28 per cent at the same time in 2012.

Reflective of this increasing positivity, the past 12 months have seen strong growth in Australian property values, with figures showing an increase of 5.4 per cent in home values across the country.

Financial commentator and finance editor for research and ratings organisation CANSTAR, Justine Davies, says the results indicate home ownership is becoming more affordable, partly due to low interest rates boosting consumer sentiment.

“As well as low interest rates though, there’s also the fact that Gen Y are getting older, with a greater proportion of Gen Y settling into their careers and, as the HASI found, feeling financially confident. That confidence is translating into a willingness to enter the property market.”

Davies offers the following tips for first homebuyers looking to enter the market:

Decide where you want to live before you start looking. This will save you time and energy.
Factor in a future rate rise of three per cent when deciding what’s affordable for you.
Get to know the market. Attend open house and auctions before you start talking to agents.
Shop around for a great value loan and compare interest rates.
Work out what your upfront costs will be.
Get a property inspection. This can highlight any structural faults as well as the presence of termites.
Maximise your chance of getting approved for a loan. Check your credit rating and ensure there are no surprises.
Be patient. Be clear about what you’re looking for.

Read more: http://www.apimagazine.com.au/api-online/news/2013/09/perception-of-housing-affordability-on-the-rise
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