Leading property commentator, Terry Ryder from hotspotting.com.au, has taken aim at state governments telling them to take responsibility for Australia’s affordability issues and urgently implement change to expand housing supply.
His comments come off the back of the Victorian Government’s recent announcement that they will increase land tax and stamp duty, a decision that Ryder describes as “complete madness.”
Ryder advised, “The Federal Housing Minister, Michael Sukkar, recently said that the states need to be the catalyst for change when it comes to addressing housing affordability and he’s largely right.
“The nation has been debating affordability issues for years, decades in fact, and nothing ever changes because we’re unwilling to tackle the main problem.
“The decision by the Victorian Government to hike land tax and stamp duty on investor owners continues the age-old problem of politicians using the housing industry as a cash cow.
“Between the three levels of government, there is stamp duty, GST, capital gains tax, land tax, infrastructure charges, application fees and various other fees and levies.
“At the end of the day, it’s the people buying the packages (including first-home buyers) who will pay.
“As an example, the taxes, fees and charges lumped on to the cost of producing a new house and land package can be massive, accounting for between 30% and 50% of the cost of the new house on land, depending on the location.
“The developer will have to pass those costs on to the homeowner which will further inflate the price of the new build.
“Inflating the price of homes is not the answer for Australia’s affordability crisis – creating more supply is.”
Dr Diaswati Mardiasmo is the Chief Economist for PRD. She too believes the current state of housing affordability within Australia is concerning and that longer term solutions are required.
Advised Dr Mardiasmo, “From a historical perspective, we can see that there is an overall declining trend in the home loan affordability index since 1995 (save the GFC) which suggests that increasing home prices has been a growing issue for some time.
“The key to keep property price movements is a balance between housing demand and supply.
“What we are seeing at the moment is the impact of having an extremely high demand due to historically low cash rates, low home loan mortgage interest rates, a resilient post-covid economy and government grants and schemes spurring property market entry.
On the other side, however, our housing supply simply can’t meet this demand.
“It’s a complex issue but Governments are faced with a choice – either curb demand in some way or improve supply so you can match demand.
“Curbing demand might prove to be difficult, especially as access to property home ownership is well embedded in the 2021 Federal Budget.
“Thus improving supply would be the leverage but that is going to require more strategically placed policies to not only increase new residential offering but also to ensure it is the correct type of residential stock.
“I have spoken to many developers who are facing difficulties from a red-tape perspective in getting their developments off the ground so there is room to improve here too.”
Ryder remains blunt in his assessment of the situation.
“For me, housing affordability remains one of the most pointless discussions in politics.
“It’s pointless, not because it lacks importance or because solutions can’t be found, but because politicians are not known for making tough decisions, especially ones that affect the bottom line.
“Australia has been debating affordability for years. The media discussion that’s happening around this issue now is the same as the one that occurred last year, 5 years ago and decades before that.
“Go back as far in time as you like and you’ll see plenty of newsprint decreeing how young Australian’s are priced out of the market and doomed to be lifelong renters.
“But nowhere are we crying out for our politicians to step up and accept the fact that it’s their revenue raising model that is largely to blame.
“Governments – and let’s start with state governments here – have a real opportunity now to make change. Change that is desperately needed.
“The shortage of rentals in many parts of Australia is dire with vacancy rates in many areas well below 1%.
“We also have a huge affordability issue where property prices are well beyond asking price and getting snapped up in mere days.
“If you can’t afford to buy and yet there are no available rentals, tell me – what do you do?
“There’s a real opportunity here for government to implement investment policies that will inspire people to buy or build rental properties.
“That sort of progressive thinking is a win-win situation as it will boost the nation’s economic recovery post-Covid but will also alleviate the current pressure on the rental market.
“What we’ve seen in Victoria, should be a blueprint for all other states on what not to do in this situation.
“Beyond that, my advice would be for anyone considering buying a rental property to take action now.
“Provided you do your research into the right location, you will achieve a premium rental return in the current climate and with property prices on the rise again, you’ll benefit from your purchase in the long-term also.”
Dr Mardiasmo agrees that government policy is the fundamental factor for creating change.
She adds, “Public policy is a beast. I acknowledge this and appreciate that governments at all levels will face an immense challenge in creating housing policy that is beneficial to everyone.
“However, a good place to start would be to strategically create a long-term system that addresses the housing market from both demand and supply perspectives.
“By long term, I mean thinking five to ten years ahead rather than band-aid 12 month policies that create frenzy and fluctuations in the market.”