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7NEWS
6 days ago
- Business
- 7NEWS
What would it take for house prices to drop in Australia?
Homeowners and property investors may rub their hands together at Australia's ever-increasing house prices. However, for the growing number of Australians who have yet to secure a foothold in the property market, the great Aussie dream can feel increasingly out of reach. A parliamentary report released in May found rising house prices in Australia have seen home ownership decline from 70 per cent in 1981 to 67 per cent in 2021. The decline is particularly apparent among young people. For those aged 25-34, home ownership has decreased from 61 per cent to 43 per cent. In comparison, for those aged 55-64 home ownership has decreased from 81 per cent to 76 per cent. More than one type of home Ben Phillips, an associate professor from the ANU's Centre for Social Policy Research, says home purchase affordability is a substantial issue in Australia. He says that with more interest rate cuts expected this year and housing supply not keeping up with demand, it could be an issue for some time to come. Loading content... "The problem is clearly not unique to Australia, but house prices relative to income are very high in Australia and higher than most other developed nations," he says. However, he argues there are some policy reforms that could put the brakes on runaway house prices. "The main policies that would potentially improve affordability would be, firstly, supply-side reforms, particularly around zoning. "These reforms would increase the supply of new dwellings in well-located areas, particularly inner and middle-ring regions of major cities and towns," Mr Phillips says. He argues they would improve the efficiency of Australia's housing market with better located and less expensive housing styles, such as more townhouses and units and splitting large blocks into multiple dwellings. Help or hindrance Mr Phillips also argues that removing first home buyer grants and stamp duty discounts could ease house price growth. "While first home buyer grants do help some new buyers, it is also true that they likely lead to increases in house prices and may largely help those who were going to purchase anyway," he says. "Perhaps they purchase earlier than otherwise or buy a larger or better dwelling. "Stamp duty discounts also work in a similar way when directed toward first home buyers," Mr Phillips says. Independent property researcher and View economic expert Cameron Kusher agrees. "One of the reasons we've continued to see housing prices rise over recent decades is due to the type of support that governments, both state and federal, offer to first home buyers," Mr Kusher says. He argues the easiest way in which government could assist first home buyers to enter the housing market is to have cheaper housing. "But pretty much all of the incentives that are offered to assist first home buyers enter into the housing market... lead to further increases in property prices," he argues. "The assistance provided to first home buyers keeps getting larger and more creative and is more about helping first home buyers to enter the market at high prices and stimulate further price growth rather than to genuinely improve housing affordability," he says. Is regional housing the answer? Greater inter-connectivity between cities and to regional areas and increasing the supply of housing would also slow house price growth according to Mr Kusher. "What if we built faster rail from each of our larger capital cities to surrounding areas where housing is cheaper?" he proposes. "What if in Sydney you could commute within an hour and a half to Cessnock, Lithgow or Bathurst or within two hours to places like Goulburn and Canberra? What if in Melbourne you could commute much more quickly to Shepparton, Morwell, Bendigo or Ballarat? "I have no doubt that the much lower cost of housing in these areas and the fact that housing is available on larger lot sizes than new housing in the capital cities would see many choose to move to these areas," Mr Kusher argues, noting the approach would also require greater investment in new housing and infrastructure in regional areas. He says that an increase in the supply of housing could bring house prices down and could be facilitated in several ways. "This would include relaxing zoning restrictions and upzoning more sites for development, limiting heritage listing of properties, making the development application process more streamlined, speeding up the development approval process and investing in key infrastructure to enable more housing development," he says. Despite home ownership rates continuing to trend lower due to rising house prices, Mr Kusher argues that the issue of housing affordability is problematic for governments and policy makers.
The Guardian
20-04-2025
- Business
- The Guardian
Who actually benefits from the Coalition and Labor's housing policies?
The major parties have pledged to give Australian renters a hand to enter the housing market, but experts warn their flagship policies will only help a narrow group of people. So who will benefit from homebuyer help – and will more people be helped into the market? Here's what you need to know. Sign up for the Afternoon Update: Election 2025 email newsletter Most of Australia's 8 million renters will not benefit from first home buyer assistance proposals, according to analysis seen by Guardian Australia. That's because only a small proportion of renters enter the housing market each year – and they generally have the highest incomes, according to researcher Ben Phillips, who is an associate professor at the Australian National University's Centre for Social Policy Research. 'It's probably going to be benefiting people who are going to become homeowners anyway,' Phillips says. Excluding pandemic lockdowns and the global financial crisis, about 100,000 households enter the housing market annually, according to home loan data from the last two decades. Nearly half of all renters sit in the bottom 40% of income levels, compared with just one-fifth of first home buyers. 'If you're in the bottom two quintiles of income, you're probably not really going to have enough income to be servicing a mortgage, whichever way you go,' Phillips says. 'There's not a lot that we've seen in the election campaign to really help those people, and they're the people who really are struggling.' That leaves nearly half the renting population, or 4 million Australians, beyond the reach of homebuyer help even before the new policies arrive. This scheme could benefit as many as 60,000 first-time buyers but will put more cash in higher earners' pockets and may not bring additional people into the housing market, experts say. The Coalition would let first home buyers deduct a portion of their repayments from their taxable income if they buy a newly built home, benefiting nearly 30,000 households annually on average – though the Housing Industry Association estimates it could be double that. The HIA expects the scheme would see the existing pool of first-time buyers swing towards buying new builds. At present, first-time buyers tend not to buy new builds, preferring existing homes, but those that do are likely to be on higher incomes. Top earners would particularly benefit from this policy as they pay higher rates of tax and therefore would get more money back from deductions. They may even get the bulk of the benefits unless banks treat the deduction as a genuine increase in income and let lower earners borrow more, according to Matt Bowes, housing expert at the Grattan Institute. 'It may not increase people's borrowing capacity, it may just be giving them a free kick in that initial period of the loan,' he says. Bowes says it's not clear whether the policy would lift more people would into the market. This proposal could help up to 30,000 people enter the housing market every year, the government estimates, though a lack of income caps may see the benefits go to those who would have the means to enter already. The expanded first home guarantee is open to all first-time buyers but is expected to be accessed by a 'pretty narrow band of new first home buyers', Labor's housing minister, Clare O'Neil, has said. By covering mortgage insurance and reducing upfront payments to a 5% deposit, the policy would let buyers get home loans sooner, permanently bringing forward the number of people who can buy, according to Peter Tulip, chief economist at the Centre for Independent Studies. 'It's a big subsidy, so that would mean you would get an ongoing increase in the flow into home ownership,' he says. But high earners would gain access to the expanded scheme if the government removed income caps, Bowes warns. The Coalition is proposing a smaller expansion that retains some income caps. About 160,000 extra people could enter the housing market in the first year of this policy's operation, but Tulip estimates the boost would only be temporary. First home buyers trying to secure a deposit would be allowed to put in 40% or no more than $50,000 of their own superannuation under the Coalition's proposal. That would more than double the number of first home buyers temporarily, before it returned to current levels, according to Tulip's research on a similar scheme. The Coalition's housing spokesperson, Michael Sukkar, says the policy 'will accelerate' homebuyers' decisions. Wealthy people and higher earners would see less benefit from super for housing as they may be better off leaving their retirement savings untouched, Tulip says. 'They can already save a deposit or get help from their parents, so they don't actually need help from the government,' he says. This policy would make it permanently easier for some first-time buyers to make both the deposit and the repayment on their homes but will take in just 10,000 people each year for four years. The plan, set to open later in 2025, was originally only for individuals on capped income and loan sizes, but Labor raised those caps in March's budget. Joint applicants and single parents earning $160,000 would be permitted to co-purchase homes alongside the government as costly as $1.3m in New South Wales. The scheme would permanently increase the number of first home buyers year-on-year and could help renters whose incomes would otherwise be too low to enter the market, though increased caps could end up helping middle-income earners more, according to Grattan expert Bowes. 'With a scheme that has a limited number of places, you increase the risk that it becomes a lottery, and those low-income people who would most benefit are the ones who miss out,' he says. Relaxed lending standards by lowering the serviceability buffer could temporarily help borrowers' earnings go further and help them enter the market. The opposition leader, Peter Dutton, has said a cut to the buffer would enable 'tens of thousands more Australians' to get a home loan. Economists agree more people could buy if regulators lowered that rate, which banks add to their lending interest rates when assessing a borrower's ability to repay loans. 'It allows people to borrow more and if you can borrow more, then maybe you can out-compete other people in the home market,' Bowes says. But like all of the buyer help policies on offer, looser lending rules would see growing numbers of people bidding ever greater amounts of money on a slow-growing supply of housing, worsening affordability, he says. 'Given high house prices, how useful is that to a broad range of people who are locked out of home ownership?'
