It's hard not to hate investors when the property game we play is unfair
Loading
But we need to catch ourselves out on this type of thinking.
Low home ownership is not always a bad thing. But it's terrible when the only other option – renting – leaves many in financial stress and struggling to save for a deposit: the very thing they need to buy their way out.
In Australia, about one-third of the population rents and one in three of these renters are spending more than 30 per cent of their income on housing, meaning they are considered to be in financial stress.
The problem with keeping people renting for life by necessity is that it keeps many of them trapped in a tough position for the rest of their lives.
Retirees who rent in the private market are much more likely to live in poverty than retirees who own their own house. Two-thirds of retired renters live in poverty, compared with one-quarter of those with a mortgage and one in 10 who own their home outright.
And the rate of home ownership has continued to drop over the decades. More than half of Australians born between 1947 and 1951 owned a home between the ages of 25 and 29, compared with one in three people born between 1992 and 1996.
The big focus on lifting our supply of houses is fantastic: both the government's ambition to build 1.2 million new homes by the end of the decade and the push to reduce the red tape – from zoning laws to slow approvals processes – standing in the way of private businesses and developers.
But as ANZ chief economist Richard Yetsenga points out, the evidence suggests changing things on the supply side alone won't be enough.
Loading
As of March this year, the government had completed only about 350 homes through its $10 billion Housing Australia Future Fund, with 5465 under construction. Building houses has never been something we can do overnight. But the process has become slower over time.
Yetsenga also points out Australia has 11 million dwellings and a population of 26 million. With these numbers, there should be far fewer people facing homelessness or being priced out of the property market.
'The challenge seems to be more about misallocation than a genuine shortage,' he says. 'Some choices, while individually reasonable, might be turning housing into a luxury for others.'
One thing we need to examine is the capital gains tax discount, which halves the rate at which investors are taxed when they sell a property and make a profit as long as they have held the property for at least 12 months.
That's a generous discount that gives investors more reason to snap up properties. That's not necessarily a bad thing, except when considering the fact investors are often competing against first home buyers, and we're facing a supply shortage.
We may not need to abolish the tax discount completely. In fact, it's probably a good idea to keep it for investors who are building new homes rather than buying up existing ones. And the additional discount for people using their investment properties to provide affordable housing is a good thing.
But reducing the capital gains tax discount for existing properties being rented out at standard (and often seemingly excessive) rates might give first home buyers a better chance at getting their feet in the market.
Because here's the thing: as long as most of the population are home owners, and the majority of their wealth is tied up in the value of their house, the overwhelming interest will always be to see property prices continue to rise, even if incomes fail to keep up.
In the 1990s, the average home in Australia was worth about 9.5 times the average household income per person. By 2023, they were fetching 16.4 times the average household income per person.
With supply only softly creeping up, it's simply unrealistic to assume house price growth will slow significantly.
I've been fortunate to have lived rent-free, until the age of 21, and to have received a little bit of help from my grandparents to boost my deposit.
But it shouldn't take luck – having the right parents (and grandparents) – to buy a house.
If we're going to treat homes as investments, it needs to be just as possible for a kid growing up in a broken household with no family help to escape the rental market and start building their wealth as it is for anyone else.
Loading
There's also a strong case for abolishing stamp duty – a levy collected by state and territory governments on the purchase of homes – and moving to a land tax paid annually on the value of the land a property sits on. Why? Because stamp duty discourages people from moving, including empty-nesters who could downsize, to homes that better fit their needs.
While we should welcome investment into new homes, we don't need to give more reason for investors (who are not providing affordable housing) to compete with first home buyers.
I'm still on the hunt for a home after one property I inspected with a price guide of $460,000 sold to an investor for $530,000.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Age
2 hours ago
- The Age
A super-sized GST – with a $3300 cheque in the mail for all
All Australians would receive $3300 a year in exchange for accepting a higher and broader GST under a plan which proponents claim would boost the budget by $28 billion a year while driving up the nation's living standards. Before this month's economic roundtable, independent MP Kate Chaney has backed an idea first floated by leading Australian economist Richard Holden to lift the GST to 15 per cent and extend the tax on food, education, health and childcare services and water and sewerage. This would raise an additional $92.5 billion in its first full year of operation, but would be offset by a $3300 rebate to every person over the age of 18 that would effectively erase the impact of the higher GST on the first $22,000 of an individual's annual purchases. The rebates would leave low- and middle-income earners up to $371 a year better off but slug the nation's top 20 per cent more than $2200 annually, costing the government $68.8 billion. That would leave the Commonwealth with almost $24 billion a year to put towards other services, paying down debt or reducing personal income tax levels. Chaney, who has been working with Holden on the concept for the past two years, said the roundtable had to be open to all tax reform options. Loading 'GST is an efficient tax – it is hard to avoid – and with lower- and middle-income groups potentially better off under this proposal, it can be progressive. Unlike personal income tax, it doesn't hamper productivity,' she said. Holden, who on Thursday will release a paper with fellow economist Rosalind Dixon on the so-called 'progressive GST', said the change would benefit younger Australians who under current tax arrangements paid a disproportionate amount of personal income tax. 'Our proposal would make our taxation system more efficient, make our economy more dynamic and provide the impetus for productivity growth,' he said.
The Age
2 hours ago
- The Age
Australians are set to inherit huge amounts of money. Here's what to do with it
Wealth is set to rain down on Australians in the next decades as the pool of inherited cash accumulated by older generations is passed down. The Productivity Commission notes $1.5 trillion was inherited between 2002 and 2021, and UBS estimates more than $US150 billion in wealth will be transferred over the next 20 years. And so for generations of Australians, managing inheritance will be a significant aspect of overall wealth management, and it won't be as simple as buying a bunch of stocks in a couple of tech start-ups and waiting for the money to multiply. Put the money in a high-interest account and wait The worst thing you could possibly do after inheriting any amount of cash is to spend it quickly. Dawn Thomas, a Perth-based financial adviser, says that often people feel an urgency to decide about what to do with money they inherit, and are often under the impression that not doing something is wasting it. 'Sometimes people feel that they have to make a decision really quickly when they receive an inheritance, but it's OK for funds to stay in a bank account, in a high-interest bank account for 12 months to two years while you make up your mind,' she says. 'You would expect there's some sort of emotion there as well because someone's lost someone that they've loved, and that [might] not be the best scenario for you to actually be making financial decisions. Sometimes, time is your best friend in being able to actually understand what you want.' Identify what you want and what you can live without Though it seems obvious, Thomas says writing down your goals is an important first step when inheriting a large sum of money. The exercise carves out time to consider how satisfied you are in various parts of your life and size up how important each is to you.
Sydney Morning Herald
2 hours ago
- Sydney Morning Herald
A super-sized GST – with a $3300 cheque in the mail for all
All Australians would receive $3300 a year in exchange for accepting a higher and broader GST under a plan which proponents claim would boost the budget by $28 billion a year while driving up the nation's living standards. Before this month's economic roundtable, independent MP Kate Chaney has backed an idea first floated by leading Australian economist Richard Holden to lift the GST to 15 per cent and extend the tax on food, education, health and childcare services and water and sewerage. This would raise an additional $92.5 billion in its first full year of operation, but would be offset by a $3300 rebate to every person over the age of 18 that would effectively erase the impact of the higher GST on the first $22,000 of an individual's annual purchases. The rebates would leave low- and middle-income earners up to $371 a year better off but slug the nation's top 20 per cent more than $2200 annually, costing the government $68.8 billion. That would leave the Commonwealth with almost $24 billion a year to put towards other services, paying down debt or reducing personal income tax levels. Chaney, who has been working with Holden on the concept for the past two years, said the roundtable had to be open to all tax reform options. Loading 'GST is an efficient tax – it is hard to avoid – and with lower- and middle-income groups potentially better off under this proposal, it can be progressive. Unlike personal income tax, it doesn't hamper productivity,' she said. Holden, who on Thursday will release a paper with fellow economist Rosalind Dixon on the so-called 'progressive GST', said the change would benefit younger Australians who under current tax arrangements paid a disproportionate amount of personal income tax. 'Our proposal would make our taxation system more efficient, make our economy more dynamic and provide the impetus for productivity growth,' he said.
