“I don’t see people stopping me in the street and saying, ‘John, you’re outrageous, under your government my house has gone up in value’. In fact, most people feel safer and feel better because their home’s value has gone up.
It was Howard’s political hero, Robert Menzies, of course, who perhaps most eloquently expressed Australia’s love affair with land ownership in his 1942 ‘Forgotten Peoples’ speech. : “The material house represents the concrete expression of the habits of frugality and savings. … one of the best instincts in us is that which leads us to have a small piece of land with a house and a garden that is ours into which we can withdraw, into which we can be among friends, into which no stranger can enter against our will.
Unfortunately, this desire is now an unmet need for a growing proportion of Australians.
The Menzies era saw a rapid increase in the Australian homeownership rate, rising from 50% in 1947 to 70% in 1961. By the 2016 census, this rate had fallen to 67%. When the results of last August’s census are revealed, they should show another drop.
The decline is most pronounced among young Australians. In 1971, 64% of 30 to 34 year olds owned a home. In 2016, only 50% had done so.
The decades-long decline in interest rates was, of course, a major factor fueling the rapid escalation in home values and the resulting decline in homeownership. Faced with significantly lower borrowing costs, borrowers were able to take on larger debts with a given level of income.
But it is the forces of supply and demand for housing that ultimately determine prices. As a society, we could have responded to the increased demand for housing created by lower interest rates by building more housing or dampening demand in other ways, such as cutting tax breaks that encourage real estate investors. We did neither.
And while the upcoming election looks set to be long on rhetoric about the joys of homeownership, it also looks decidedly short of policies of real substance to actually stop runaway real estate values or help drive higher homeownership rates.
Labor, of course, ditched its two flagship housing affordability policies of halving the capital gains tax cut on investment properties and abolishing the negative gearing on new properties.
Instead, Labor’s central housing policy is a pledge to create a $10 billion fund to build 30,000 low-cost homes. The idea has been welcomed by affordable housing advocates, but is surely just a drop in the ocean of unmet housing demand.
The Coalition has focused its efforts in government on helping first-time home buyers with a program to help them borrow on deposits of just 5% and avoid paying mortgage insurance to lenders. Single parents can also access a similar scheme with deposits of just 2%.
While helpful in passing some potential borrowers through, such policies do nothing to reduce the long-term upward pressure on home values.
Young Australians deserve more than piecemeal policies and soothing words when it comes to solving the lingering housing affordability crisis. Now, this volume – it is a great idea.