Another roundtable on the ‘affordability crisis’ trots out the same old lines, and shows us just why we can lock in price increases over the longer term.
The Real Estate Institute of Australia (REIA) hosted a housing affordability roundtable last week – to look at ways to fix Australia’s so-called “affordability crisis”.
The round-table included some big names, like:
- Kevin Andrews MP, Minister for Social Services;
- Peter Bushby, President, REIA;
- Brent Davis, Industry Policy, Master Builders Australia;
- Graham Wolfe, Chief Executive, Housing Industry Association;
- Alex Boorman, Research Director Australia / NZ, RFI Intelligence;
- Phil Naylor, Chief Executive Officer, Mortgage and Finance Association; and
Hang on lads. It’s looking a little imbalanced. A bunch of blokes from the builders and banks. This is a social issue. Can’t we get some one from some do-gooder organisation, maybe a woman..?
Op, there she is:
- Hannah Gissane, Project Co-ordinator, Equal Rights Alliance;
Jokes aside, the communiqué they issued at the end of the roundtable is a good wrap up of just where housing is at in Australia, and where it’s going. And why prices aren’t going to become “more affordable” any time soon.
It starts out with the usual preamble on housing being a right and affordability being a social and justice issue:
Access to affordable housing is a goal that is shared by the Government and all sectors of the community. A lack of affordable housing impacts on the functioning of the economy as well as the wellbeing of individuals and the cohesiveness of communities and society.
With first home buyers finding it increasingly difficult to enter the housing market, home ownership in Australia is declining after four decades of stable levels. In November 2013 the proportion of first home buyers in the total number of owner-occupied housing finance commitments dropped to its historically lowest point. First home buyers currently face significant challenges accessing affordable housing. This suggests a need for policy makers to address the issue.
To me, these numbers alone don’t necessarily mean there’s a problem. The share of FHOBs in finance commitments is down, but down from levels that were propped up by first home owner grants and so on. As I’ve written before, I also think we need to see a year or two’s worth of price momentum behind the market before first home buyers will take the jump.
Likewise with the fall in the rate of ownership. Because if you’re arguing that the rate of ownership’s too low, then you’re arguing that the rate of investorship is too high. That’s a judgement call, and it’s a judgement call you don’t hear anyone making.
Me, I welcome the emergence of property as a real investment class over the past twenty years. I think it’s a good thing. I’ve seen property as an investment class liberate a lot of people from the daily grind (myself included!).
And our ownership rates remain well above a lot of countries, anyway.
And so, like pretty much every bit of analysis on ‘housing affordability’, there’s no mention of any policies to bring investor rates down.
No, in fact, I think we’ve heard all of these policy prescriptions before:
One of the factors highlighted at the roundtable as a major driver of increasing house prices and declining affordability is the undersupply of housing. This was identified as a priority policy issue.
Supply has been unable to keep pace with demand due to a number of reasons: land availability; zoning policies, length of planning processes and environmental regulations. Furthermore, unless supply is addressed the gap between supply and demand would significantly widen by 2015.
Taxes at local, state and the Commonwealth level were also identified as one of the important factors determining housing supply and influencing housing affordability.
The Australian supply side is constipated. We’re just not building enough houses, and this is far and away the biggest reason why prices are so high, and why prices are just going to go higher and higher.
But we all know this (well, the readers of my blog do). There’s nothing new here. The question is, what do we do about it? Let’s see what they say…
After some pie in the sky dreaming about removing stamp duties, which I agree with, there’s this:
It was suggested that greater consumer awareness and government support of lenders’ mortgage insurance and enhanced competition amongst lenders would drive product innovation, especially focused on prospective first home buyers, and would be facilitated through a strong securitisation market.
Additionally, options to unlock the potential of shared equity as an alternative form of housing finance should be considered.
Hang on. Product innovation, a stronger securitisation market, alternative forms of finance….
These are all demand side measures aimed at pumping more credit into the system. What’s happened to the supply side?
Because, as I’ve written before, if all you do is pump demand without doing anything to help supply respond, then all you end up with higher prices.
Affordability gets worse. Not better.
And this, in a nut shell, is where the “affordability debate” ends up every time it comes around, and why house prices are locked into an upward trajectory.
Because as much as we try to hide from the fact, if we truly want greater affordability, then what we want is for prices to come down.
But what government in their right mind would come out and say, “Today, we’re announcing a policy aimed and making house prices fall.”
Forget it. And as much as parents might feel sorry for their kids, I don’t know many who’d be willing to take a hit on their own capital values.
And so there’s a lot of agonising over what should be done, but no real willingness to actually see prices fall.
But the government needs to be seen to be doing something. And so they pump demand. Handouts to FHBs sounds like a good idea…
But it jacks up prices, and in a few years we have another debate about the affordability crisis…
Seen it before, we’ll see it again.
Rising house prices are part of the economic furniture now. Nothing’s going to change that.