Don’t worry, there is a plan to save Australian housing. It’s been done before and worked. And it’s being done again now.
The plan is the same one that luck would have it played out in Sydney in 2003. Back then the RBA decided to pop the Sydney bubble. It got ugly in the mortgage belt but the city was saved from a proper correction by the serendipity of the mining boom, or more to the point, what it brought with it: an income and people flood.
Sydney house prices thus partly adjusted downwards in price but they were kept aloft by skyrocketing incomes and rents, that is yield:
That’s the plan for the eastern capitals again today. Despite the huge build out of dwellings, the RBA and APRA are today choking supply via the banks while the Federal government runs population growth at full tilt to back-fill the price bubble with rising rents.
So far they are failing thanks to crashed incomes. But they are succeeding in tightening the Melbourne rental market and keeping Sydney’s very low:
And rents are rising ahead of other cities.
Which brings me to today’s Rob Burgess fail:
If we’re planning to become a nation with a larger proportion of renters – like many other nations – big changes to the retirement system must be made.
The obvious change is to consider John’s ‘savings’ in his home to be equal to Alice’s savings in her super account – that is, bring the family home into the pension asset test.
The other change would be to raise rent assistance from its current, hopelessly inadequate level.
What we cannot do is set one group of householders on a path to prosperity, and another on a path to poverty in retirement.
CEDA’s report contains an excellent list of measures to start addressing affordability.
But to the extent that governments fail to accept its advice, they must start planning now to mitigate the harm Australia’s distorted housing market will do to retirees in the years ahead.
Beyond negative gearing reform (which will help), there is no plan to follow the CEDA blueprint. On the contrary, the next phase for our centrally planned bubble is to screw renters as hard as possible using mass immigration to support absurd prices.
Time you got over yourself, Rob, and stepped up against it.
