Soaring house prices: an economic threat eating away the future By Shane Wright June 15, 2021 https://www.smh.com.au/politics/fed...t-eating-away-the-future-20210614-p580s2.html Australia’s runaway house prices are making the national economy less stable and lowering productivity, according to research which warns home ownership is now out of reach for anyone under the age of 35 as governments repeat failed policy fixes. Special research led by UNSW finds the property market is now a “triple threat” to the nation’s economic future with the ongoing surge in prices creating economic instability, diverting money away from more productive pursuits and affecting the lending policies of the nation’s major banks. Australia’s runaway house prices are increasing economic stability and contributing to slowing productivity, new research led by UNSW has found.Crediteter Rae “A system that raises housing costs for all Australians, that raises instability and lowers productivity does not serve the nation well,” said the researchers, headed by the university’s City Futures Research Centre’s Duncan Maclennan and Hal Pawson. “And as for rising housing wealth, it is not like the wealth created from effort and innovation, for that creates gains for all. Rather, it makes some Australians, the affluent and older, better off by making younger and poorer Australians, and also future buyers, worse off.” House prices globally have accelerated since the middle of last year as government stimulus and record low interest rates have been funnelled into property markets. Melbourne’s median house price has reached $908,000 while in Sydney, it is $1.2 million. The Reserve Bank has said it is focused on keeping interest rates low to drive down unemployment. Governments have pumped money into various policies aimed at first-home buyers including the NSW which plans to offer a $25,000 grant, replacing existing stamp duty concessions. The UNSW research, based in part on a survey of the nation’s leading economists and housing policy experts, suggests such an approach would do nothing to make homes more affordable. It found that since the mid-1990s, house prices had outstripped income growth, contributing to a 4 per cent drop in national home ownership, heavily concentrated on young people. Home ownership levels among under-35s has halved since 1995. ”In responding to housing economics evidence, Australian housing policy actions seem to perfectly meet Einstein’s test of madness, in repeating the same actions and expecting different results,” the researchers said. A federal royal commission into Australia’s housing future was required, they recommended, given how few “coherent policies” were in place across the country to deal with all the factors behind the surge in house prices. The national cabinet of state and federal leaders set up to deal with the coronavirus pandemic should have a permanent housing committee to deal with policy co-ordination, they said, while the federal cabinet should have a specific minister responsible for “housing policies and outcomes”. All governments should end stimulus measures aimed at the market and instead focus on the social rental sector. The researchers also recommended the Reserve Bank’s mandate should be expanded to include “maintaining a more price stable and well-functioning housing market”. The Reserve Bank of New Zealand was recently directed by the Ardern government to take into consideration the housing market. A major issue identified by the research, to be released on Tuesday, is the level of household debt: Australians are among the most indebted in the developed world. The researchers said the rise in debt increased national economic instability. Australian Bureau of Statistics data shows the average new loan reached a record $635,300 in NSW in April, an increase of $35,000 over the past 12 months. In Victoria, the average new loan is now $523,000, up from $488,000 in April last year, while the average loan for a first time buyer is at a record $451,500. “Residential investment can ‘crowd out’ investment in more productive activities and lead banks to prioritise lending to housing consumption and ‘rent seeking’ investment with no positive feedback into economic productivity,” the researchers found. Another issue is the growing dependence on the “bank of mum and dad”, with the report noting that the chances of young people being able to buy homes was increasingly dependent on the financial status of their parents. In a separate report into the global housing market released on Monday, the OECD said house prices across much of the developed world had grown so fast and by so much that they were eating into ability of households to pay for other essentials such as health and education. It found Australian house prices had experienced the fourth largest increase in after-inflation prices across the OECD, up by 120 per cent between 2000 and 2020. Only New Zealand, Canada and Sweden experienced bigger increases. “House prices have typically risen faster than average incomes, and households have borrowed more and more to buy their home, so that the burden of mortgage servicing has become heavier for many households despite lower interest rates,” it said. The OECD said prices for Australian housing, which ranked second only to the United States in terms of its adverse environmental impact, was being pushed up by a lack of supply and restrictive land use laws. “Restrictive land-use governance criteria that depend on too many categories and excessive prescription on allowable activities have played a role in limiting land supply,” it said.
"The OECD said prices for Australian housing, which ranked second only to the United States in terms of its adverse environmental impact" What does this mean?
Possibly how high cost of housing is having an effect on working class and low income families, homelessness, social problems, bankruptcy, family stress, perpetuating a cycle of low standard of living, a rut they can't climb out of.
Nonsense. Just save up and pay CASH for the stuff you want (just like our grandparents did) and everything will be fine, . The minute you borrow something (from a bank or whatever) you become a slave and you also create inflation (via the fractional bank "reserve" system), get it?
Or it could be this... "The OECD’s analysis also shows the emissions-intensity of Australian housing was the second-highest behind the United States, for things such as construction, heating and cooling. “Housing has a very large carbon footprint,” Mr de Mello said." https://www.afr.com/policy/economy/...st-rate-in-oecd-over-20-years-20210614-p580sr
Just wondering how they would quantify that, relative to other countries. Is there some sort of score or methodology I have missed out on?
With all due respect but fuxx you. Can you do some basic math, pal? Median income, minus taxes and all expenses, ending up with savings. Divide the current median house prices in Australian cities or Canadian cities by the annual savings and tell us the current generation is equally affected than your grand parents. Don't be ridiculous.
When I lived there (3.5 years), I found Australia to be a strange place. The society is similar to all island nations I've ever lived in, where a few powerful families own a large majority of key businesses and dabble in politics to ensure the success of the businesses. Australia may be a large land mass, but with only 20M people, it's quite small. I lived in Sydney but traveled up to Port Macquarie often enough, spent time up in the Cairns region and been to Perth, Margaret River and down through Melbourne where my wife's parents live. The more blatant things that caught my attention was the huge disparity in wealth between the average population and the wealthy. Kind of reminded me of the US southern states but more awkward because the avg and the poor in Australia are generally white while in US southern states they are black (lots of whites as well, but no wealthy blacks in sight). For example, during the NSW flooding, major roads were cut off and cars were diverted inland through side roads. For the first time in my life I saw metal tin roof huts with 8 or 9 scruffy blond hair kids standing in front, staring at the circus of cars passing through their off road. Reminded me of so many downtrodden people I'd seen in the countries I lived in or visited in Asia and Africa. Just couldn't believe what I was seeing before driving back to North Sydney, where coastal houses don't sell for under 15 million.