With the rate of home ownership collapsing for younger Australians, Westpac’s head of consumer banking, George Frazis, has called for more assistance to be given for first home buyers (FHBs) to help them get on the property ladder. From The AFR:
Westpac’s head of consumer banking, George Frazis, says saving a deposit is one of the biggest challenges facing first home buyers and lenders should do more to help young people save the initial payment they need to get onto the property ladder.
Mr Frazis, who identified housing affordability as a major social issue when he started in the job two years ago, warned against moves to dampen house prices.
“This whole notion that you want a system where house prices drop is flawed. It is over $7 trillion in terms of an asset class. If that loses value, it would destabilise the economy,” Mr Frazis said in an interview with The Australian Financial Review.
“This is not about prices going down, this is about ensuring that those who find it difficult to raise a deposit have avenues into getting into home ownership”…
“This is not an issue of not being able to afford a house once you have got it but this is about being able to afford a deposit. There are restrictions around that and as prices went up and up, you had to save more. That impacted younger Australians,” Mr Frazis said…
Westpac research found 67 per cent of respondents blamed the high price of housing as the main obstacle to buying property. But 53 per cent said saving for a deposit was also a major hurdle.
What a load of self-serving rubbish. If housing is too expensive for younger people to afford, then the solution is obviously to lower prices. Policies that lower the deposit gap and drag more FHBs into the market will obviously be inflationary and drive housing prices to even more unaffordable levels. This is economics 101.
If Frazis genuinely cared about the issue, he would argue for policies that simultaneously lower demand and boost supply. You know, basic things like:
- Normalising Australia’s immigration program by returning the permanent intake back to the level that existed before John Howard ramped-up it up in the early-2000s – i.e. below 100,000 from 200,000 currently [reduces demand];
- Undertaking tax reforms like unwinding negative gearing and the CGT discount [reduces speculative demand];
- Tightening rules and enforcement on foreign ownership [reduces foreign demand];
- Extending anti-money laundering rules to real estate gatekeepers [reduces foreign demand]; and
- The federal government providing the states with incentive payments to:
- undertake land-use and planning reforms [boosts supply];
- swap stamp duties for land taxes [boosts effective supply]; and
- reform rental tenancy laws to give greater security of tenure [reduces demand for home ownership and reduces rental turnover].
Of course, such policies would very likely lower bank profits, which is why industry representative like Frazis rarely endorse them.
