35 years ago.

The ¼ acre block, a backyard big enough for cricket/footy against neighbours and a weekly run over the lawn with the Victa Mower. A world in which people of all ages and incomes had a good chance to own a home and have a job.

That was then…

Since 2012 alone, house prices have risen 50% in Melbourne, and 70% in Sydney. Real wages, as we have written before, have remained stagnant. Home-ownership rates among under 65s are falling and affordability challenges are consigning young people to the fringes of our capital cities. For young people lucky enough, owning a house increasingly depends on their parent’s financial position/generosity.

According to a Grattan Institute report, Housing affordability: re-imagining the Australian dream, to stem rising public anxiety about housing affordability we should build 50,000 extra homes a year for a decade. To achieve this the report has a “to do” list for the state and federal governments.

For the states, this list includes, but is not limited to the following:

  • fixing the planning rules of our largest cities to allow more homes in inner and middle-ring suburbs
  • allowing more small-scale urban infill projects without council planning approval
  • allowing denser development on key transport corridors
  • replace stamp duties with general property taxes
  • encourage more institutional investors likely to provide longer-term tenancies by making state land taxes on investment property a flat rate with no tax-free threshold
  • broaden land taxes to include owner-occupied housing
  • release more greenfield land, particularly in Sydney
  • better taxes to capture the windfall gains from re-zoning
  • reforming property taxes to improve affordability
  • amending tenancy laws to make renting more attractive

Whilst the supply side has been a key area of focus, for its part the Commonwealth Government can reduce demand by:

  • reducing capital gains tax to 25%
  • abolishing negative gearing
  • including owner-occupied housing in the Age Pension assets test
  • slowing Australia’s migrant intake
  • enforcing laws covering foreign residential real estate investment

The politics of property reform are fraught because most voters own a home or an investment property and will likely resist any changes threatening their wealth. This remains a wicked challenge in desperate search of a solution.

Market Insights

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