Housing ‘affordability’ in Australia
‘Housing affordability’ has been the catch phrase on everyone’s lips for years now along with the constant threat to young incoming buyers that they will never be able to afford to buy their own home in the current market. The term ‘housing affordability’ is a meaningless term engineered for the sole purpose of allowing politicians to pretend they are on both the side of home buyers and home sellers.
Our politicians keep reassuring us that they want petrol, fresh food and health insurance to be less expensive and more affordable for the average Australian, however, we don't talk about "petrol affordability" or "bread affordability" let alone create an index of the price of bread divided by the median household income. Promoting chatter about "housing affordability" allows politicians to distract us from the simple question of whether house prices are "too high", "too low" or "just right".
Investors and general population relying on capital growth to wealth build for their futures became nervous when it was revealed during the federal election campaign that the ALP planned to reform ‘negative gearing’ on the basis that such changes would put downward pressure on house prices. Whilst some would argue that labour costs are to blame for forcing up the affordability of housing, according to the Australian Bureau of Statistics, construction wages have, in recent years, risen more slowly than average wages. It also shows that construction worker productivity has grown faster than construction worker pay which means the unit labour cost of building a house has been declining in real terms, not rising. Further statistics show that construction labour costs account for only around 10 per cent of housing prices; that this proportion is falling; and that construction labour accounts for about the same proportion of the price of a house as real estate fees and stamp duty.
Rapid population growth, legislation permitting self-managed super funds to borrow to buy housing, the 50 per cent capital gains tax discount, negative gearing and rising income inequality are really the main causes of rising property prices.
Whilst there is no quick fix for first home buyers to the market, those wanting to own their own home and eventually perhaps a second and third home for investment purposes to wealth build for their future financial stability and eventually retirement, cannot go past the sound advice to regularly save for their first deposit and then to take advantage of whatever incentives and grants that may be available to them to start them on their way.