Overcoming the Impediments - What will it take to shake up housing affordability?
Federal Budget initiatives go some way towards helping first-homebuyers, but a coordinated approach is key to making a real impact, says CoreLogic CEO Lisa Claes.
Prospective home-buyers will have been all-ears listening to Scott Morrison hand down the 2017 Federal Budget, eager to see how the government is responding to the housing affordability crisis that has kept young people’s plans on the back burner for so long.
But if CoreLogic research is any indication, they may be left feeling underwhelmed – at least in the short term. Even though the introduction of a ‘First Home Super Savers Scheme’ will allow Australians to direct a proportion of their pre-tax income into saving for a deposit, the Core Logic Perceptions of Housing Affordability report indicates this may not be enough to alleviate the strain for first-home buyers.
Housing affordability has been a contentious issue for some time. Despite banks tightening their approach toward investor lending and stricter rules around foreign ownership, prices have continued to rise. In the Federal Budget, the Treasurer has just introduced additional measures to counteract negative impact from investors, yet ironically investor activity appears to be the least of first-homebuyers’ worries. Only 27% of buyers highlight it as a major impediment to getting on the ladder, and only 30% are concerned about negative gearing.
So what do first-homebuyers think would really make a difference?
Concessions and grants
Stamp duty is a lucrative tax for state governments, but a bane for homebuyers struggling to come up with the initial costs required to buy a property.
According to CoreLogic research, buyers now have to save 1.5 years of gross household income for a 20% deposit (up from 0.8 years 15 years ago), and that’s before they factor in stamp duty costs. Consequently, 44% of homebuyers say stamp duty and deposit costs are their biggest impediment to getting on the housing ladder, with three-quarters saying they would welcome an exemption or reduction in stamp duty.
Government grants are also an appealing proposition for first time buyers, with almost three quarters (71%) believing a grant would help them enter the property market. Although they’ve been introduced in some states, and have no doubt gone some way to alleviating buyers’ financial pressure, in reality their impact on affordability is questionable. In fact, grants may have the opposite effect on housing affordability, by fuelling demand and pushing up prices in the lower echelons of the market.
The right dwellings in the right areas
With houses out of reach financially, apartment living is becoming a more realistic option for many families these days. But there’s a catch: the majority of the 150,000+ apartments currently under construction are one or two bedroom units, more suited to investors and renters than growing families.
Around 60% of prospective buyers believe increasing the availability of land would improve affordability. But with parcels of land earmarked for development often situated on urban fringes, it’s equally important for state government to invest in solid infrastructure, providing homeowners with the amenities, jobs and transport they rely on.
A dedicated housing minister
And with all the different factors impacting housing affordability, there needs to be someone to coordinate the responses. At $7 trillion, residential real estate is by far Australia’s largest asset class, yet there is a currently no one at the helm steering the ship. CoreLogic research indicates clear support for a dedicated Federal Housing Minister, with almost two-thirds of respondents (63%) in favour.
At the moment, housing affordability is by far one of Australia’s greatest challenges and there is an overwhelming need for someone to champion housing policy across government sectors.
As it stands, there’s no quick fix available. Rather it’s a convoluted test of resourcefulness, requiring the cohesive commitments of private, public and government sectors working towards a common goal. It’s a monumental task yet all those involved can take heart in knowing their efforts could positively impact a whole generation of Australians for whom owning a home is currently nothing but a pipe dream.