Rising Housing Affordability Concerns Amid Policy Debates in Australia

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In the ever-evolving landscape of Australia’s housing market, two distinct narratives emerge, highlighting the growing concerns around housing affordability and the contentious debate over negative gearing and capital gains tax benefits. As house prices in inner-ring suburbs of capital cities are forecasted to surge, driven by affluent buyers and familial financial support, experts warn of a worsening housing crisis potentially exacerbated by proposed changes to negative gearing.

Nila Sweeney, in her article “The dominant force driving house prices higher,” sheds light on the potent mix of wealth and equity propelling the housing market to new heights. Carlos Cacho, Jarden’s chief economist, points out that until interest rates fall, the market will remain in the hands of higher-income or wealthy buyers, particularly affecting the inner-ring suburbs. This trend is buttressed by a significant rebound in house prices last year, with a more than 8% increase attributed to these affluent demographics. The income disparity is stark, with CBA data revealing a jump in borrowers earning between $200,000 and $500,000 annually, while those in the lower income brackets see a minimal increase in mortgage applications.

On the flip side, Ben Dorrington’s piece, “Experts warn negative gearing changes could worsen housing crisis,” explores the political friction surrounding the Australian Greens’ stance on the federal government’s Help to Buy scheme. The Greens advocate for limiting negative gearing and capital gains tax benefits, a move criticized by housing industry experts as detrimental to housing supply. Jocelyn Martin from the Housing Industry Association emphasizes that further tax increases or regulatory complexity would exacerbate the already highly taxed and regulated new housing sector. Similarly, Denita Wawn of Master Builders Australia and Anne Flaherty of PropTrack express concerns over the adverse impact such changes could have on rental supply and the broader housing crisis.

Both articles converge on a crucial point: the need for a balanced approach to housing policy that addresses affordability without stifying supply. As Carlos Cacho suggests, “only the top 20 to 40 per cent of income earners across the capital cities can now comfortably afford an average home,” highlighting the affordability crunch. Meanwhile, Maiy Azize of Everybody’s Home champions the call for reform, arguing that current tax breaks are exacerbating inequality and making housing in Australia increasingly unattainable for average citizens.

The discourse surrounding Australia’s housing market and policy reforms is complex and multifaceted. As the debate rages on, the fundamental issue remains clear: the need for equitable solutions that ensure all Australians can access affordable housing without compromising the vitality of the housing market.

References:

Sweeney, N. “The dominant force driving house prices higher.” https://www.afr.com/property/residential/the-dominant-force-driving-house-prices-higher-20240214-p5f4sj 

Dorrington, B. “Experts warn negative gearing changes could worsen housing crisis.” https://www.realestate.com.au/news/experts-warn-negative-gearing-changes-could-worsen-housing-crisis/