Contributed by Joe Montero
According to research carried out by the Grattan Institute, an Australian think tank, home ownership has been falling in Australia for three decades.
This mainly affects those under 55 who make up that age group that would have been the main buyers of new homes during the period.
the demographic of those who would be buying their home during the period.
But is the 25 to 34 age group that are the hardest hit. Back in 1986, some 58 percent were living in their own home. Now it is down to 45 percent. Most of the drop has been in the past decade. Home ownership has also fallen for the older group. It is only the large numbers reaching retirement age who had purchased their homes in an earlier era that is keeping the overall number from falling further still.
The Grattan Institute has data shows that home prices have gone up by 40 percent over the last two decades, suggesting that home ownership is now out of reach for many Australians.
However, any suggestions that only those pushed out of home ownership are affected are wrong. The median measurement covers up that in reality, many low and middle income earners are close to the wire and have to pay a significantly higher proportion of their income. Rents have also been pushed up, completing the picture of growing housing unaffordability.
Buying a home requires at least two incomes coming in. The housing bubble has also pushed up rents. This is not only ensuring home ownership is unreachable, but that growing numbers are living close to the wire.
Blaming the problem on a lack of housing supply is wrong. There is no housing shortage. Prices have not gone up because of excessive demand. The fall in the proportion of the population buying indicates that this is the case and insisting on this line of argument denies that the problem is a bubble, which means that prices are pushed up because housing has become a major means of speculation, when there is trouble across the whole economy.
Australia’s major urban centres, where most of the population growth is occurring, are filled with unoccupied residences. The owners are not putting them on the market. Why? Because they are not in the hands of owner occupiers, but in the hands of businesses that can use the benefit of negative gearing payouts and corporate capital gains tax exemptions. It can be more profitable to leave them empty and cut down maintenance and administrative expenses, while still securing a good profit. So long as this remains, there is no real housing shortage that will resolved by building more properties that are going to be used in the same way.
In these urban centres, roughly 60 percent of housing, is not purchased as a home, but as an investment property, take advantage of the handouts and profit by speculation on future price rises. When this involves huge portfolios, a comparatively few concerns have the power to manipulate the market to their advantage.
New construction needs to occur in the context of a different housing market. This can only come about if in the first placed, a legal restriction is put on corporate monopoly influence and negative gearing is phased out. Keeping residences untenanted must be made unprofitable.
Only if these conditions are met, will further construction influence price. But a fall in price and less profit will be a disincentive to private construction. Consequently, government must step in with and build affordable public housing and do so on a scale that is large enough to have an impact on price.
Australia also needs alternatives to home ownership. Traditionally, the best advantage of home ownership has been long-term security. Rental, on the other hand, has been designed as a short-term option and is much less secure.
Secure and affordable rental would impose less of a burden and allow greater life style flexibility and as a more attractive choice, would have its own downward pressure on property prices. Another benefit ids that it would stimulate the Australian economy through the creation of jobs and wealth, as well as provide for more disposable income to be used to buy other goods and services.
The rub is that it requires creative non-market approaches. Public housing is one. The expansion of housing cooperatives is another. It also requires that society have a will to do it and that the government be required to play its part.