Another idiotic housing affordability “solution” emerges

By Leith van Onselen

Leading real estate rent-seeker, the Property Council of Australia (PCA), is pushing for another idiotic policy “solution” to fix Australia’s housing affordability woes: offering a government-backed low deposit home loan scheme. From The Australian:

A government-backed low-­deposit home loan scheme could help address housing affordability by getting more buyers into the market and adding to the housing stock, according to the Property Council of Australia…

The PCA highlighted the Keystart program in Western Australia, where buyers can purchase a home with a 2 per cent deposit in Perth and up to 7 per cent in regional areas without paying lender’s mortgage insurance…

PCA chief of policy Glenn Byres said the program had been “useful in helping to drive supply” and had helped buyers who would otherwise be locked out.

“The big challenge right now is the deposit gap and people having to save sufficiently to meet the deposit requirements of ­lenders,” Mr Byres told The Australian…

BIS Oxford Economics senior manager for residential property Angie Zigomanis said any rollout of such a scheme might encourage some borrowers to buy better properties than they could otherwise afford, which could drive up prices for more affordable homes…

Digital Finance Analytics principal Martin North… echoed concerns about pressure on pricing, saying that when similar programs had been introduced around the world “it tends to lift property prices higher”.

Earth to PCA: you don’t “fix” housing affordability by sucking sub-prime buyers into the market and raising demand. You fix it by implementing policies that lower demand and boost supply. You know, 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 over 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
  • Providing the states with incentive payments to:
    • undertake land-use and planning reforms, as well as provide housing-related infrastructure [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].

As usual, the PCA is using the fig leaf of “housing affordability” to lobby for government subsidies to the housing sector. This shameless self-interest should be resisted on all fronts.

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  1. I read “Mr Byres” on one of those quotes and thought Wayne Byres was backing this… Then I read the whole thing and breathed a sigh of relief, haha.

  2. You know, things like:
    1. Raising interest rates to RAT positive to encourage saving and to ensure efficient allocation of finite resources thereby making house affordable while at the same time protecting the sovereignty of our nation and protecting the welfare of future generations.
    2. etc

    • Know IdeaMEMBER

      It seems that there is a need to crash the unproductive economy. I can’t see any politician on the horizon with the wherewithal, let alone the mandate, to do that.

      • “let alone the mandate”
        Nobody can get a mandate. We got here by voters continuously voting for more free stuff. It’s been a simple procession of voting for the mob that offers the most free stuff. Again quoting Pogo “I have seen the enemy and he is us”
        Vote Flawse for dictator.

      • Won’t need a mandate. Their (politicians) incompetence and obsession with keeping the property ponzi going will see to its demise. After all it has been estimated that the Federal politicians have a combined property portfolio of well over $300m. Combining all levels of government this could be a billion or so dollars. The longer they keep it going the bigger the wreck when it happens.

    • I wouldn’t pedal ideas like that round here, flawse. We are in the company of very many people who ascribe to Keynes’ idea that the rentier (predominantly ‘savers’) should be euthanised i.e. the ‘savings don’t matter’ crowd 😉

      • Yeah I know mate – then they pretend to be conservationists and worried about CO2 and climate change!!!! Absurd doesn’t begin to describe it.

      • The current ‘experiment’ tends to bury the idea that ‘savings don’t matter’ but very few are taking note as considerable value has the potential to be destroyed. They continue to double down on the thinking that caused the problem in the first place.

  3. Is there any data on people who have the deposit but still refuse to play? I know that describes our family. Surely we can’t be the only ones?

    • Probably a lot more than the media would have you believe. For example savings rates amongst younger folks are pretty strong and that money has to go somewhere – even if it is in a savings account.

    • Out of curiosity, are either of you willing to share why you are refusing and what it will take to change your minds? We found that not be able, or being unwilling to buy a house set us on a path to financial literacy we would otherwise probably never have gone down.

      • Housing for us:
        * should be convenient to travel to/fro from work (for both of us) – should be no more than 40 mins by bus, walkable prefered
        * should be convenient to my son’s childcare/school etc – should be no more than 5-10 mins drive, walkable prefered
        * should be nearer to some national park – just for the greenery aspect
        * must be min 3 bedrooms (spacious) with 2 bathrooms and 2 car parking spaces. Kitchen should be decent size not a one bench kitchen that sits 4 ft away from the TV point in the lounge room

        Finance wise:
        * should not spend more than 20-25% of our household income

        With these factors in mind, we came up with suburbs/postcode and realised that ‘levels of debt required’ to “own the house” (satisfying our criteria) was utter madness and would have been sheer stupidity on our part if we went down that path. Renting was a no-brainer.

      • “being unwilling to buy a house set us on a path to financial literacy we would otherwise probably never have gone down”

        We both have a lot in common. 🙂 And I am thankful for that as I have been able to reach networth greater than or equal to my peers without taking on any freaking debt. Thats something we are proud off.

      • MediocritasMEMBER

        My reason is that I won’t buy high. “Owning” a house is ridiculously expensive relative to rents. So I rent, save and invest elsewhere in less dangerous assets with better liquidity. People who say rent money is dead money, whilst simultaneously paying huge amounts of interest on a jumbo mortgage, make me smile.

    • I would hold on. Leading up to 2008 i was totally against buying a house due to cost even though i had a strong deposit. Then the gfc hit and you would not believe the fall in prices for about 6 months as many were panicking which is when i bought. This cycle will happen again just this time it’s gone on longer than usual and may continue for a year or two yet but will definitely repeat. Why do you think all these wankers have come out of the woodwork lately?

    • Yeah I’m holding out but have been for 3-5 years, still in no hurry though, the tide will turn and I have other options for the time being!

    • Add me to the list. No way I’m gonna pay $1,000,000+ for some fcuking dump in Canberra. Happily renting and getting good returns on my cash in the MB fund (Cheers guys :-)) and will continue to do so until value improves. If that takes another few years then so be it.

    • Me too. Was in Brisbane for a long while. I saw the quality of life deteriorate to such an extent that it made not a lot of sense to even consider it any more. I used to think that Pullenvale or Brookfield or somewhere in the Sanford area a 10+ acres would be nice. Not anymore. Not when it can take you an hour and a half to get to work. Not when it costs million ++ dollars for a place…. so, no, I don’t care anymore. I have the money, for a sizeable deposit… but I’m not interested. Might bite the bullet and throw a chunk on the MB fund as it’s getting SFA in the UBank account….

      Add to that the fact that you can get stabbed in the back at work and find yourself on the ars3 after 17 years of service.., and yeah… excellent job security, fsckers!

      I took a hike into the regional New England area, but stable IT jobs on my level of expertise are about as rare as hen’s tits…

    • There are dozens of us, dozens!

      I think there is a very large subset of <35 yos refusing the play the game. I even hear it as an argument that there is no bubble "all of the people holding off buying a house will swoop in if there's a small drop in prices".

      I subscribe to the view of This Time Is Different: Eight Centuries of Financial Folly, by Carmen Reinhart and Kenneth Rogoff. Whenever I hear the phrase "this time is different" as an argument pro-bitcoin price, pro over priced Aussie housing, pro equities with stretched valuation I know that it is no different. I will rely on eight centuries of economic folly rather than 22 years of uninterrupted of economic growth to be my guide.

      • I have to say I’m surprised by the reaction to this- I didn’t realise there were so many of us. I wonder how representative a sample MB readers are though? Personally I kinda feel this is newsworthy.

      • Mining BoganMEMBER

        Around about 20 prefer-renting-to-owning types out of the 58 shut-ins who read this blog. That’ll look good at domain.

        “30% OF SHUT-INS LIKE RENTING!!”

        Maybe newsworthy in much the same way as Ping-Ping the Panda not being able to pleasure the ladies anymore oddspot type newsworthy.

    • I lack the constitution for servitude. Thus I refuse to pay more than 5-6 times income on a depreciating asset.

      I pity the people locked in to 30 year mortgages working jobs they hate eating peanut butter for lunch, chasing the dream…of being a debt serf.

      • When missus gives you the sh*ts, the kids are edgy and misbehaving, the neighbors around you have sold up and been replaced by a pack of bogans, the office is mostly politics and thickened BS, and to top it all off, you can’t sleep at night, and “the little guy” doesn’t want to “stand to attention”…. you gotta wonder “is it all worth it?”. Well, is it,

    • Mining BoganMEMBER

      Yep, originally for financial reasons..far better off renting over owning…but now it has become the lifestyle. Freedom of time and money. Couldn’t imagine going back to full time work. The very thought of it makes me shudder.

    • We’ve been looking at houses for a few years now (Brisbane). It’s not refusing to play, per se – kids are coming up two years old and our current house (we already own, bought about 4yrs ago) is not appropriate – but we are being very fussy – to drop a million-odd on a house it needs to be damn near perfect.

    • Add me to that list, but admittedly, I’m close to capitulation. I live in Tas and prices are going nuts and unlikely to subside any time soon! For now a decent place is somewhat affordable (at least for me), but in the short to medium turn they probably won’t be. My current mindset is do I get in now while it’s still somewhat affordable, OR wait and see if broader macroeconomic factors filter through (as postulated on MB) whilst at the same time witnessing my deposit erode away. Tricky situation…

    • Sorry but you can add me to the list too. The maths just doesn’t stack up. Why pay $1000 a week in interest, property tax and insurance, when I can let the landlord take the hit by paying him $800 a week for the privilege. Plus he’s about to have to replace my dishwasher. What he probably doesn’t get is that he has a far higher chance of going bankrupt than I do (can’t go bankrupt when you have zero debt). I should be asking that furker to pay me a security bond.

    • truthisfashionable

      Adding myself to the list. Whilst we have a decent deposit even for Sydney prices, everything in my soul says to hold off longer and wait.
      Either prices will revert or it will shoot off upwards again meaning that Sydney is no longer viable for myself and my wife.

    • Me too. However, after watching the direction Australia has been headed in the past decade (or more perhaps) and navigating where it is headed in the next decade, even if prices were to decrease to a productive level, I think I will use my deposit to purchase outside of Australia. We will see.

  4. another idiotic policy “solution” to fix Australia’s housing affordability woes: offering a government-backed low deposit home loan scheme

    Sounds very familiar. “As a dog returns to his vomit, so a fool repeats his folly” (Proverbs 26:11)

  5. You list Tenants rights last however I suspect that it should be first on the list of anyone that really cares for the fate of those priced out of the housing market.
    In today’s housing market (at least in NSW) a landlord can evict a tenant (at the end of a fixed term lease) with as little as 1 months notice and offer absolutely no explanation. In essence the law allows the landlord to clean away the tenants as if they were never there for no reason other then to maximize their profit (aka flip the house)
    Imagine a situation existed where good tenants had enduring rights and could require the house to be sold with them retaining residency (think about it :what would such a house be worth to a prospective landlord?).
    In places like Germany (from my experience) most people rent from larger companies (in my case it was Alliance insurance) however half way through my time there I received a notice that the new owner was Munich-Reinsurance. Nothing changed for me, two big companies swapped some assets for whatever reason and life continued for me unaffected by whatever motivated either seller or buyer to do make their decisions. After all as a tenant I also had rights!
    I suspect had this happened in NSW I would have been served No-Cause notice to end my tenancy and the landlord would have sold the house unoccupied without the complication of a sale with Tenants in place. Maybe the landlord would do some of the repairs that they refused to undertake while it was a rental house, heck most NSW landlords would even try to dump these “tidy-up for a quick sale” costs onto the last tenant by withholding their bond and sometimes even suing them for damages. And why not do this when Tenancy laws are structured to be so intentionally lopsided? Lets be honest tenants are just the dog s4it that landlords try to wipe from their feet when they no longer need the rental income / cashflow.

    • I couldn’t agree more that tenant’s rights are the main issue. We just moved to a regional area (after luckily securing jobs there) where we could buy, because our experience of raising a family and renting in both Sydney and Melboure (we’ve tried both) has been horrible. Landlords who won’t fix basic issues while charging ridiculous rents, constant rental rises, uncertainty over the future of the property (i.e. the landlord might sell), moving costs (cleaning, movers, whatever ridiculous bond claim the landlord makes), and my kids can’t even paint their rooms or have posters on the wall! Plus, if you have pets, renting is three times as hard. If we could have stability in a commutable suburb, then, sure, we would’ve kept renting. But for us, owning a house (which cost less than half the median Sydney price) in a regional centre with good schools just provides more stability–even if prices fall. It’s all well and good to say ‘keep renting’ but that’s not a very viable for lots of families who don’t want to live in precarious circumstances.

  6. DarkMatterMEMBER

    Seeing as it now appears quite acceptable to propose silly solutions that reek of self interest, here is another one.

    Instead of UBI, why doesn’t the government buy everyone an apartment? That would be better than UBI because it would eliminate the biggest financial burden placed on everyone and make sure they had a place to stay. As a bonus, there would be an incentive to stop granting new citizenship as the real cost of this to Australia would not be able to be swept under the rug.

    • I went to a function last year where some bloke in the crowd actually proposed exactly that to Chris Bowen.

    • There is indeed enough cement, glass, wood, plaster to give every Aussie a house. The mineral wealth of this nation is not distributed in a just manner. The right wing psychopaths enjoy inflicting pain on the poorest voters.

      But if a flat costs $270k and UBI is $14k/year, UBI is a greater amount of money over 20 years.

      Americans almost got UBI under President Nixon! The bill even passed the lower house! Argh.

      • DodgydamoMEMBER

        Sorry Joel you’re out by a factor of ten. $40M or so will buy you a building of approx 130 apartments so closer to $300k each.

    • Giving everyone a section of land would be better. Might even encourage some decentralisation.

      • DarkMatterMEMBER

        Welcome to the early 20th century. My grandparents started out on a 640 acre “selection” up in the bush in about 1920. That was how a lot of rural communities got started in Australia. They got a beginning, made a go of it, and formed towns and communities.

        Of course, that was before we realised how essential megcities were and kicked the people in the bush to the kerb. As compensation we gave them Ice, so at least they have that.

    • Remember though that if the govt ever did do that the cost of building an apartment will go from 300,000 to 1mil, you know mates and all…

  7. “A government-backed low-­deposit home loan scheme could help address housing affordability by getting more buyers into the market and adding to the housing stock, according to the Property Council of Australia…”

    should read… “A tax payer-backed low-­deposit home loan scheme”

    The tax-payers should backstop a program that makes housing more expensive for their kids and carries all the risk, brilliant!