Just as the US after the housing crash, Australia is becoming a nation of renters

Just as the US after the housing crash, Australia is becoming a nation of renters

By Catherine Cashmore
Tuesday, 29 May 2012

It’s been a while since we heard about the “top 1%”.  The protests that spread the globe earlier in the year have fallen under the radar inAustralia – buried deep below the Thompson affair and global “wows”.  However, according to recent reports, if you live in the United States, the 1% are busy bulk buying thousands of real estate foreclosures and taking full advantage of what’s becoming – in some states – a very tight rental market.

The once “American dream” that fueled a nation with a similar owner-occupancy rate to that of Australia is slowly turning into a rental nation.  It’s no secret that US recovery from the financial crisis has been little more than a halfhearted limp.  If owner-occupiers have managed to hold onto their homes, it’s been at a substantial capital loss. Aside from the large number of foreclosures – which according to a recent report in theNew York Times has been in the order of some 4 million since 2007,   potential home owners now find it virtually impossible to access finance.  This, along with the pressures of record high unemployment, has begun to fuel an unparalleled rental boom.

For example, in San Francisco the vacancy rate has dropped to around 2% compared with 5% in 2009.  Property managers are charging fees simply for placing an application, and rents have increased some 13% since last year.  As one report puts it – trying to access rental accommodation has turned into a ‘competitive sport’, and it’s a similar story in other cities such as New York, Los Angeles and Boston.

Whether the US buying market has bottomed out or not is debatable and like Australia, it’s impossible to draw broad conclusions because each state suffers its own unique conditions. However, recently Gary Andersonreported in Business Insider that the number of bank-owned homes for sale in the most affected market of the US – Las Vegas – has fallen from 18,000 to just 1,600 in a remarkably short period of time.  The suggestion mooted by Anderson is that banks have been marketing these foreclosures for a period of 30 days at a “real” price, after which – if not sold – they are taken off the market and offered in bulk to investors, who enter a bidding war to purchase the homes at “wholesale” prices.  There is no evidence for this in the article and it’s also worth noting that Las Vegashas recently passed a bill requiring banks to use the more expensive “judicial foreclosure” process, which would add to the reduced figures.  However, there’s plenty of evidence that points towards a massive Wall Street buying spree of foreclosed homes which is creating a huge disparity in the market.

The US government is moving ahead with a trial project to sell big pools of foreclosed family homes owned by Fannie May, in some of the hardest-hit markets in America.  The initiative has created what Reuters report as a “Wall Street investing craze” and the L A Times suggests “Wall Street hedge funds and private equity firms” are ” positioning themselves to snap up foreclosed homes and convert them into rental units”.

Of course, when you have a large number of investors purchasing affordable family homes that are the bread and butter of the owner-occupier market, you not only have speculation potentially inflating prices, you also have more distressed potential home buyers firmly stuck on the rental ladder.  It’s important to emphasise the US housing bubble resulted from a sub-prime lending crisis and not from large numbers of cash buyers looking for positive rental returns.  Therefore, it would be unwise to jump to any broad conclusions that this is the start of another potential boom-and-bust “bubble” cycle.  However, the market tipping in favour of investors over owner-occupiers has led to many wondering if theAmerica dream has become just that – a dream.   Such is the outcry, some 15,000 realtors recently gathered in Washington DC to protest against the investor-dominated market.  As one realtor on the video states – “we’re here to protect home ownership and the American dream!”

Back to Australia, and although we have been fortunate enough to avoid the level of housing stress seen in America, I often wonder if we shouldn’t take time to learn a few valuable lessons in our own defense of the right to home ownership. The right not to be kicked out after a six-month or 12-month tenancy, the right to own a “share” of tangible Australian land, the right not to suffer from rent increases – and the right to feel secure.  The number of first-home buyer commitments nationally fell by 19% in the first three months of this year and is currently sitting some 24% below the five-year moving average.   Outside the east-west divide of those prospering from the mining sector, potential first-home buyers are becoming long-term renters and under current policy decisions I can’t see it improving.

Like America pre GFC, Australia has grown used to its reliance on a booming housing market.  Generous tax incentives such as negative gearing, first-home owner grants, capital gains benefits, borrowing against equity, restrictions on residential development, low interest rates and an insistence on keeping growth and job centers predominantly locked in capital city locations has pushed the cost of metropolitan accommodation to unsustainable extremes.  Household debt to income ratios sit at around 150% and while all the above policies have supported debt fueled growth in the past, it’s time we took steps to discourage our housing market from becoming a long-term investor-dominated paradise.

The drop in interest rates may be welcomed in so much as it eases the burden on the average mortgage holder releasing much-needed disposable cash.  However, lower rates primarily encourage investors to borrow more, leveraging interest-only loans against increasing yields in a very tight established housing market. Other policies such as negative gearing and poor urban planning encourage investors to take advantage of the bread and butter of the first-home buyer market.  Investors aren’t typically buying million-dollar real estate, they’re purchasing inner-city apartments – the “affordable” options, leaving first-home buyers unable to compete.  Investors have the upper hand in our housing market, and it’s assumed the asset will provide above-inflation capital growth, which the above government policy decisions all but guarantee.

A recent OECD Better Life index of 34 member countries looking at “housing, income, jobs, community, education, environment, governance, health, life satisfaction, safety and work-life balance” has voted Australiaas “the world’s happiest country”.  It shouldn’t come as a shock when you consider the economic climate in the USA and Europe.  It doesn’t take a “Better Life” index to work out, when comparing Australia with nations currently on their knees with double digit unemployment, we’re going to come out top of the pile. Of course, Wayne Swan is having a field day on the news, and who can blame him?  There’s hasn’t been an abundance of good news in the Labor camp of late.  However, neither Wayne Swan nor a “Better Life” survey can hide the fact that in Australia, there is a widening gap between the rich and poor.

Last year, the OECD bought out its Divided We Stand: Why Inequality Keeps Rising report.  It showed that since 2003, Australia has jumped some five or six places up the ladder in terms of inequality and currently sits in ninth pace.  Although we fare better than the US, since the year 2000 the rich/poor divide has been speedily increasing.  Studies conducted by the ABS have shown the top fifth of households hold some 62%of the country’s total wealth. We now boast the world’s richest woman (Gina Rinehart), whose fortune is estimated to be $29.17 billion.  Never is it more evident that the wealth of the mining boom simply does not trickle down than when you see reports such as “WA is moving away from the east” and read from the 60,000 jobs created in Australia over the last 12 months, some 50,000 of them were mining.  As the article clearly points out, the eastern and western states may be connected physically, but mentally our western state is fast becoming a closer partner to Asia than Canberra.

The rental market in Perth speaks volumes.  Vacancy rates are as low as 1.6% and over the past 12 months, the average rent has increased by 10.5%.  Yields are now coming in at 5.5% and expected to get higher. WA is taking a greater share of overseas migration than anywhere else inAustralia, and the consequential stress on house prices will place pressure on those most vulnerable.  We may have low default rates inAustralia; however, we can hardly hail it a healthy environment when over 50% of an average family’s income is spent on funding mortgage repayments.

A recent AHURI (Australian Housing and Urban Research Institute) study suggests 43% of mortgage holders are redrawing on their mortgage for “pressing financial needs”.  The report presents a compelling argument that Australia is moving into a “housing-based welfare system” with funds heavily invested in the “prospected” safety of bricks and mortar.  Falls in superannuation, a dramatic reduction in business investment, lower capital gains from investments and continual shocks of confidence as Europe threatens to do a Mount Vesuvius-style eruption have led to an over reliance on the mining boom and vain hope that China will continue to need us far into the future.  As long as China goes the course, we can prop up any prospected surplus and wave around figures that give the notion we’re all enjoying Western Australia’s increase in wealth.  The true picture is far more dangerous.

Most people don’t go through life looking for extreme riches; however most assume if they’ve worked hard, paid their taxes and invested wisely, they can at least rely on the government to set in place the potential to grow old in relative comfort.  Around 64% of the gross wealth of Australian home owners is locked in their housing.  The expense of housing ensures most of an average family’s income is given over to servicing high mortgage payments and hedging against prospected growth in overall household expenditure – investment elsewhere is therefore compromised.

Through various methods of manipulation, successive governments have done everything they can to inflate house prices and encourage over-investment in what should be viewed primarily as a commodity for shelter rather than a quick road to leveraged riches.  Housing is debt-fuelled and totally reliant on supply of credit and the ability of banks to prop up lending volumes. The mining boom may have protected the wealth of this country – however all “happiness” surveys aside, this wealth is not being distributed across the broader population – “haves and have-nots”.  As a consequence, many of today’s workers will enter retirement still paying off mortgages or servicing high rental fees.

Various studies have shown two thirds of residents under the age of 35 living in Sydney are locked out of home ownership altogether and considering Melbourne’s house prices are only baby steps behind Sydney’s, the stats are likely to be similarly mirrored.  The prospect of growing numbers reaching retirement locked out of home ownership is as frightening as an economy heavily leveraged against a debt-fuelled, rate-sensitive capital model. Our reliance on China’s continued need for Australian commodities is all but assumed, however various economists such as Satyajit Das have pointed out many times that China’s economic picture may not be as sunny as it seems.  Should Europe collapse, the resulting consequences and looming dark clouds could reduce that demand a lot sooner than expected.

As it stands at present, there is nothing to suggest an immediate or quick deflation in house prices – however we should all keep a close eye on Europe fully understanding the consequences any dramatic fallout could have on commodity demand from China.  We are short on adequate affordable housing supply around the major job centers where the population is rising and demand for accommodation (buying or renting) is consistent.  However, housing should be a provision first and foremost for owner occupiers and models that encourage broad based investment in the established market (as in the US) need to be scaled back and pushed into increasing supply and infrastructure in newer suburbs in order to boost the supply and feasibility of affordable accommodation.

Options for secure long-term tenancy need to be investigated to provide those unable to purchase adequate affordable and secure shelter into retirement. And we must increase the supply of good quality public and social housing. New South Wales and Victoria’s decisions to cut back their funding for public housing is remarkably short sighted. The powers that be have their heads in debt-fuelled sand. Our banking sector has directly or indirectly invested around 80 per cent in housing. We’ve already seen finance tighten and income stagnating, not to mention the risks of a rising unemployment as small business’s struggle.  The housing crash inAmerica – albeit caused by a landscape different to our own – is resulting in similar consequences, by ensuring increasing numbers will enter retirement firmly stuck on the rental ladder.  There will always be those who are unable to purchase, however can we call a system “just” if we’ve manipulated policies that advantage investors over owner-occupiers, potentially locking many out of home ownership all together?

Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition. 

The disappearing Aussie backyard and its emotional, physical and mental toll

The disappearing Aussie backyard and its emotional, physical and mental toll

By Catherine Cashmore
Tuesday, 22 May 2012

It would be easy to outline the physical and emotional effects skyscrapers and the surrounding density of concrete tend to inspire. To start with, when you fly into a city, a wide array of high-rise accommodation and office buildings is immediately indicative of wealth and prestige. Like the axel of a wheel, the concrete jungle is where the power is concentrated – the heartbeat of the city. As many regional areas will attest, capital cities are top on the priority list when it comes to providing amenities, transport facilities, medical centres and so forth.  All too often, those living in the center of it all tend to forget a life exists outside the city boundaries at all.

The crunch always comes down to “sustainably” managing population growth and the quandary of squashing ever-increasing numbers into our growing metropolises. Urban developers seem obsessed with the notion of building high-rise concrete jungles or at the very least, limiting development to apartment living or high-density housing. It may seem like an obvious solution – it certainly does if you’re sitting behind a desk with a calculator in hand, because it’s argued that building high is more economically viable than creating new infrastructure in the outer suburban peripheries. “Happiness economics: clearly doesn’t feature high on the priority list.

I recently read a report on the value buyers place on having a garden. In the study, it’s claimed that some families would spend up to an extra $75,000 to get a private bit of “green” around their properties.  My reading of the findings followed a question I’d be asked by a reporter researching the notion of gardens and their place on a buyer’s priority list. As with all equations, the crunch ends up in the dollars you spend. With land values increasing in inner-urban zones, outdoor spaces are decreasing and the modern preference – even in outer-suburban new estates – is to go low maintenance and build to the boundaries. After all, Australian’s still beat the world record for desiring homes with the largest floor space per capita. For many, a bigger block of land is only used as a key to a bigger and better house.

Yet, probably one of the best Australian “inventions” was the old suburban home, primarily made familiar to those of us who emigrated to the country because of programs such as Home and Away and Kath and Kim. A house in the burbs with an ample backyard for the kids is the foundation of what was once called the great Australian Dream. In fact, the quarter-acre block – which eventually became the  eighth of an acre block – was a great ecologically friendly model, and it all came down to the backyard.  The backyard was used for growing food, disposing of waste, socialising with neighbours, playing and enjoying a good dose of vitamin D from the glorious Aussie sunshine. Considering our modern push to look after the environment, it’s surprising a decent-sized backyard does not feature higher on the priority list with planning authorities, who tend to allow housing in new suburban estates to take up larger footprints leaving no more than a walkway of paved private outdoor space.

It was an early report from the Grattan iInstitute that coined the phrase“The virtues of suburbia may yet turn out to be the saving of our cities”.  In the report, it points out how the foundations of living sustainably from private land surrounding the home have eventually broken down to a form of inner-city dependency on outlets such as Coles and Woollies.  It’s not just the idea that a garden enables families to produce food, collect water from a rain tank, or dispose of rubbish in the compost heap. It’s the fact that backyards promote health benefits that are hard to emulate in a public park (if you’re lucky enough to live near one) and with our busy urban lifestyles, even the local park doesn’t often feature unless you own a dog or have children who make use of the facility.

I shouldn’t need to point out the benefits of a garden.  From a personal perspective, I feel as if I grew up in a garden – I spent more time outdoors than indoors during summer months. Flowers are just about the most beautiful phenomenon nature produces – internationally symbolic of love, sympathy, beauty, celebration and commiseration. The land is where we get our food, but the concrete jungle is where we “grow” children who have no idea if a potato comes from underground or off a tree. Living in a city is dynamic, convenient, exciting and yet without a balance – the pace of inner-city life is exhausting, polluting, frustrating and draining. The health benefits that can be obtained from a private garden –social, physical and mental – would be too numerous to list.

It’s been argued on many an occasion that buyers prefer apartment living.  Apparently the ageing population want to downsize, there are increasing numbers of single-person households, and the persistent desire to live in the inner-urban localities all equates to a ‘new Australian dream’ no longer founded in a detached dwelling. However, aside from the additional costs selling and buying can impose, there’s good reason why many older baby boomers choose to hold on stubbornly to their detached family homes.  According to a report ‘Project New Home’commissioned by the Grattan Institute mid-last year researching Australian’s “housing preferences.” Even taking into account changing lifestyles, detached homes are the preferred option of our buying market, whether old or young. The report outlines:

“Associations with small spaces are still predominantly negative – with ‘the average’ apartment representing the most challenging end of the spectrum.  Although there is a realisation that available land is shrinking and we, as a community, need to be ‘smart’ about housing options of the future – there are strong rational and emotional drivers that still fuel the preference for detached housing…

“Owning a fully detached home is expected (particularly for families), it is part of building a life, something that is earnt and relished and the best property option

– Outside of the pull to detached houses are the push factors away from attached homes of which ‘neighbours’ is the major barrier.”

In short – an apartment may be where we start, but it’s not where most want to end up.  Aside from the convenience of being close to an inner-urban locality, concerns with neighbours, owner’s corporations, privacy, lack of outdoor space and so forth, put a large majority of maturing buyers off the idea all together. The apartment market is viewed as a place where most people rent or stay for a temporary period of time – generally not considered suitable for family life.  It’s probably for this reason, along with pressures of affordability, that the major part of Victoria’s growth has been evidenced in fringe localities such as Wyndham, Melton and Whittlesea. However even in these areas, such is the price of land, when it comes to building, buyers push to the extremes of development. If you can squash a four-bedroom house on a block rather than comfortably fitting a three-bedroom home, it seems a better investment idea to do so (it certainly does to developers who can charge more for the former).  The bigger the house, the more the on-sale value – land is only valuable in many investor’s eyes if you can build on it.

One of the benefits of increased density (it’s argued) has been the notion that it reduces pollution from people commuting across town to access jobs and other facilities.  However there’s little evidence to support this, although living closer to the city may encourage increased use of public transport, our car dependent life styles and inefficient public transport systems, ensure traffic congestion and urban pollution continue to rise.  Not only this, but any notion that apartment buildings are environmentally friendly has been put to bed by many organizations such as “Sustainable Population Australia” who have reported;

“Studies have shown that high-rise housing increases per-capita greenhouse gas emissions by up to 30% due to a total reliance on power, switches and being unable to enjoy the natural cooling of shady trees and living sustainability. Department of Planning and EnergyAustralia study (NSW) and the ACF Consumption Atlas show high-rise buildings emit more greenhouse gases per dwelling and per person than smaller blocks of flats, townhouses or detached homes”

Of course, Harry Triguboff managing director of property group Meriton, states that:  

“Councils think that people care whether there are tall buildings or lower buildings. People who buy the apartments prefer taller buildings because they allow more light and afford views and are cheaper to run than lower ones – which require more lofts, more stairwells, and more security, all adding to the upkeep.”

This is predictable, but quite astonishing.  The costs of running high-rise buildings alone are tremendous when you take into account features such as lifts,  electric security gates, lighting, heating of common areas and so forth – not to mention the footprint incurred from so many individual apartments each running a separate fridge, air-conditioner and plasma TV. I’ve not been through one yet that boasts a solar panel to reduce electricity costs. To have the luxury of light and a view adds to the expense and yet there is rarely a guarantee the view won’t be built out.

All of this is evidenced the stark difference in the yearly owners’ corporation fees of high-rise verses low-rise, which can add up to thousands.  Furthermore, to keep development costs down, a balcony is becoming somewhat of a dying luxury.  The above quote of $75,000 extra for a garden is a little over what the average buyer would shell out for the luxury of a medium-sized balcony on one of these inner-city apartments.  A wide expanse of heat-producing concrete increases the environmental footprint.  However all this aside, as the original design of the “garden city” proves you can have high-density housing on a smaller footprint of land and still retain lawn space around the buildings, thereby maintaining the streetscape and environmental benefits.  However, it does require double-storey living.

We’re lucky in Australia because early planners had the foresight to provide abundant park land in each inner-suburban locality.  It’s still possible to look out over our cities and take in an abundance of “green”.  However, for how long is debatable – London, which has an estimated population of around 8 million (a number that metro Melbourne is prospected to achieve around 2050) used to hold the reputation of “of being one of the world’s greenest cities because of its extensive public parks and gardens. However a recent report by the London Wildlife Trusthas shown Londoners are paving over gardens to avoid maintenance costs associated with gardening in some cases using the area as an extra parking lot at – according to the study – an “alarming” pace.  According to the report “an area of vegetated garden equivalent to 21 times the size of Hyde park was lost between 1998 and 2006” simply through the demise of the private backyard.

This kind of transition is not limited to London – it’s a worldwide phenomenon.  Modern lifestyles don’t leave time to tend a garden or grow food – after all, it’s argued that Australia has the world’s hardest workers – tending a garden is therefore a luxury reserved for those who are retired. In his excellent publication “The Death of the Australian Back Yard” Tony Hall argues that the change from backyard culture has “has not been subtle or gradual in either space of time”.  It’s an excellent paper and well worth a read.  In it he demonstrates, through time-lapsed aerial shots, how our living preferences have altered.  Even though there’s still evidence of healthy interest from much of the population in gardening, it’s the renovation shows that dominate the media and keep the focus on the interior.  A low maintenance garden is a selling point in a modern home; a big back yard is simply an area holding development potential.

The loss or demise of the domestic backyard has an effect far beyond that of the individual household.  Issues such as the loss of biodiversity in plant species, the loss of areas of land in which to soak up rainfall, not to mention the role gardens play in micro climate control and combating carbon dioxide and various other pollutants permeating the air.

Whilet there is no doubt the push towards urban consolidation is an inevitable consequence of our population growth and changing cultural shift, we’re certainly not healthier for it – and many would argue that neither are we happier for it. First home buyers have increasingly limited choices when it comes to housing options, and for those that do settle in inner urban areas – as a recent report from the Grattan Institute entitled‘social cities’ highlights – there’s a  worrying increase in social isolation and loneliness due to residential seclusion. It’s impossible to improve the situation without active communication with local residents.  Therefore, power needs to be placed in community hands to decide what’s needed in each locality – whether it be a communal garden, ‘pocket park’, games room, or some other form of meeting place. High density planning should have a requirement to make room for some form of freely accessible social interaction.

While gardens may be looked upon as high maintenance and a private area of green space may not be in vogue or high on developer’s priority list, it is down to our urban planners to ensure we don’t lose the joy of an area of green lawn and maturing trees all together.  Australia has an abundance of land for everyone to spread out and enjoy the joys of nature if only more effort and expense was dedicated to the development of industry, transport arterials, and growth in the smaller “satellite” cities and regional centers.  As it stands at present, we’re losing a part of Australian culture that cultivated an ingrown appreciate of “the land”.

Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.

While governments provide rhetoric and reports, thousands are waiting for real housing solutions

While governments provide rhetoric and reports, thousands are waiting for real housing solutions

By Catherine Cashmore
Tuesday, 15 May 2012

If you’ve been following the budget and numerous political highlights over the past few weeks and getting tired of fluctuating insecurity over interest rate movements and unemployment figures, take a break and look towards the property market, because it’s currently in a phase of unchangeable stability. However, the aesthetics of the localities we have become familiar over the last 20 years have changed considerably – and consequently the value and potential liveability the existing established real estate holds has, and is, changing as well.

Australia 2030, and the shape of our cities as we move towards 2030, is firmly in the hands of urban developers and well underway for rapid expansion. For example, in Sydney, by 2030 the focus is to stop urban sprawl and the development of freestanding houses. According toGraham Jahn, director of planning, development and transport for the City of Sydney, the new city will be “compact” apartment living close to the CBD, providing a “more communal way of life”.

It’s prospected that by 2031, the 26 square kilometres of Sydney City will have 55,000 new dwellings housing 88,000 new permanent residents. Needless to say, high-rise towers will be the dominant feature and any outdoor living activities for those in inner-city localities will need to take place in the local communal park.

Across all states, the building boom of high-rise apartments is astounding. In Melbourne, plans are well underway to accommodate 90,000 new dwellings by 2031. In Brisbane, the Infinity Tower – which will dominate the skyline and provide “546 meticulously designed apartments” over 81 levels – is one of many projects currently under construction. Every capital city government website has a prospected plan for 2030, which outlines its new vision for Australian cultural life.

Even with the recent slowdown in population growth – which at 1.4% (ending July 2011) is the lowest it’s been since 2005-06, our capital cities are crying out with growing pains – not due to lack of roof space as such, but lack of affordable roof space and affordable rental accommodation. However, despite the bursts of construction, the buying market remains soft. Gaining credit is harder than it was pre-GFC, first-home buyers don’t generally qualify for high-rise accommodation due to various loan restrictions– issues I have pointed out previously. Neither does this type of accommodation offer affordable rental opportunities, as any quick search through internet listings will prove. Instead, they are principally marketed to the foreign market, for which there are no buying restrictions for new or off-the-plan dwellings – and it can only be hoped demand is sufficient, considering our high Aussie dollar, to soak up the reserves currently in progress.

Residents familiar with the current outlook of their neighborhoods are understandably concerned. Organisations such as Save Our Suburbs – active in various states across Australia – have been established to combat development of high-density housing and the consequences of an increasing population. Needless to say, there is little if any consultation with the community in light of the new developments affecting various neighborhoods. As Save Our Suburbs points out on their NSW website “the majority of communities report that they feel their governments are not concerned with community preferences on planning issues”.

It’s a common cry – no one likes a neighborhood changing. And as we’re all aware, having a block of flats or large subdivision constructed in the near vicinity will not only affect the streetscape increasing the general foot traffic, it can also have consequences on local public transport facilities, which struggle to cater for a higher numbers of residents.

The federal government’s ‘Our Cities’ discussion paper reads like a tourist brochure – full of pictures of laughing residents or artist drawings of leafy parks with children playing and parents picnicking. Within it, the national 2030 vision is set out

“To provide for our communities, urban development needs to offer a diversity of housing options that incorporate a substantial component of affordable housing that is age friendly, innovative and has good environmental performance.”

I’m not so sure the mass building of high-rise projects fits into the description above, however the words are noble in themselves.

The initiatives outlined in the report to improve housing affordability include the ‘Housing Affordability Fund’. However, as I’ve pointed out previously, it’s hardly an initiative to be proud of. When I last checked the2011 audit, the fund had outlaid $12 million for administration and set aside a promised $500 million for the projects , yet on last count it had only assisted 749 home buyers, while encountering some major administrative cock ups along the way. I don’t call this improving affordability or wise use of taxpayer funds. Yet it’s an initiative the government continues to boast about.

Also outlined in the report is National Affordable Housing Agreement, which requires each state to dedicate federal funds towards the achievement of “key outcomes”. Some of the outcomes include decreasing homelessness and ensuring people have access to affordable rental accommodation and housing. Any initiatives dedicated towards such outcomes are commendable, however when you delve into the progress reports to see how progress for this agreement is tracking, highlighted are some serious problems in auditing the results. The latest report states:

“It is not possible to track progress towards each of these outcomes on an annual basis. Performance reporting under the agreement is particularly reliant on survey and census data that are not available annually. In addition, the performance framework itself is still under development, and not all outcomes are currently able to be measured.”


“There is very limited information on the nature and extent of homelessness and risk of homelessness, including the housing”

And of course, last year’s admission from the ABS showing its homeless figures had been “inflated” further confuses the data and ignited arguments from homeless advocates who maintained the existing figures had been underestimated, not over-estimated.

The federal budget outlined its commitment to the first-home buyers’ grant, but in truth, what a dismal failure it’s been. The percentage of first-home buyers “shopping” in the market is no higher now as a result of the grant and rarely fluctuates from the long-term average. State by state, first home buyer activity currently varies between 13.1 per cent in South Australia to 23 per cent in the Northern Territory. As many ‘potential’ first home buyers will now tell you, the dream of buying a ‘home,’ is just that – ‘a dream’.

Commitment to the National Rental Affordability Scheme also remains in this year’s budget. It’s a commendable initiative established to increase the supply of affordable rental accommodation for “key workers” such as police officers, nurses, teachers, and so forth. The scheme provides financial incentives for investors to purchase housing, which is identified as “suitable” by the government.

There are conditions of course; there is a requirement to hold the property for a minimum of 10 years while allowing a rental rate 20% below the market average. For doing so, there is an annual income tax kick back – currently at $9,524 per dwelling, indexed annually to the rental component of the CPI. However, it’s not intended for the solo investor and neither is it “social housing”. It’s primarily for property trusts and superannuation funds, and the accommodation is intended for “low- to middle-income wage earners”. Although the scheme has helped a proportion of families – as the Tenants Union rightly points out – the rents charged are still too expensive for a large number of low-income households. Therefore, there are still a too many falling through the net.

As for the social housing initiative, this has no extra money forthcoming in the budget. As Shelter and Anglicare point out, any drop in the waiting list figures nationally have been due to a tightening of eligibility criteria in many jurisdictions rather than a genuine reduction. Again, in light of this, monitoring numbers of those in need starts to get blurred in the rhetoric that travels back and forth between government and social housing advocates. Trying to assess the success or failure of the project is not an easy task – it often gets lost in various criticisms over hasty built or inappropriately located projects. However, broadly speaking the initiative is a good one especially when you consider there are some 250,000 people sitting on waiting lists for public housing often waiting nine months or more.

In Victoria the public housing problem has reached crisis point after the release of its recent audit report, which showed the state was “facing a cash crisis, with all cash reserves expected to be exhausted during the 2012–13 financial year based on current budget estimates”. Interestingly enough, the government has come up with ‘radical reforms’ to combat this problem, which look positive in themselves, however judging from past record, expensive reports into various reforms never seem to transpire into promised results.

For example, if you go into the IMAP reports (the Inner Melbourne Action Plan ) a collaboration of inner-city councils currently assisting in the state government developments towards 2030, you’ll find a specific section devoted to “housing affordability”.

It seems since mid-2009 letters have been going back and forth between various ministers trying to investigate site-specific opportunities for “inclusionary zoning” (a process whereby governments mandate a certain proportion of a new development be marketed below market rates).

Fast forward to mid-2010, and finally a suitable site was found at 400 City Road in South Melbourne. Unfortunately, or perhaps predictably, it failed to gain support from the state government. So back to square one, and now, three years since ‘inclusionary zoning’ was mentioned we’re apparently awaiting another report into “Community Land Trust Models and their application in Australia”. According to the latest progress paper “reports will be provided to the Committee in due course”. An “end date” for “due course” isn’t provided

All of this rhetoric about social housing wouldn’t be such a problem if we hadn’t experienced such a boom in house prices for which wage growth couldn’t keep pace. It’s all OK for some economists to argue that when you take the national wage growth and national house price, the inflation has not been so extreme. This is true; however the main sticking point with the argument is contained with the stubbornness to keep the bulk of development in inner-city locations. Limited outer urban land releases have also been another hot topic along with hefty development overlays in growth activity centers, which add, disproportionably, to the capital cost.

Those benefiting from increased equity in their house prices have taken full advantage of Australia’s negative gearing policies to purchase a second, third and fourth investment properties. With more borrowing power than first-home buyers looking for similar established homes, this has locked increasing numbers out of home ownership.

Rents have increased disproportionably to wage growth, and there’s growing disconcertment in the younger population charged with handing over 50% or more of the weekly wage for the privilege of shelter.

How many uncountable reports have there been into extending train lines to outer urban areas to provide greater options for first-home buyers willing to compromise on location and move further out? Better transport systems would enable them to do so. However the reports have resulted in nothing more than expensive promises that remain sitting on a minister’s desk. Along with this, it could be argued that money spent on government first-home buyer incentives has been wasted, ineffectively inflating market prices rather than improving affordability.

The big key to our problem is allowing those who are working on an average wage the chance to enter the property market should they choose to do so. This can only be achieved with lower property prices and more affordable stock to meet demand. Back to the report I cited at the beginning of this article and it boldly announces: “Australia’s future tax system noted that some existing taxes on housing, especially stamp duties, are inefficient and can impede housing supply. The review suggested that reforms such as introducing a broad based land tax, along with changes to the taxation of rental housing and rent assistance, would go some way toward improving housing affordability”.

I don’t know the cost of the ‘Australia’s future tax system” review. However, it’s clear that the current government has firmly ruled out any changes to current models of negative gearing or increases to rental assistance.

As for first-home buyers – the road ahead is bleak. The advice I have is to start saving young and take advantage of the few positive initiatives out there such as the first-home buyers savings account. Don’t be afraid to compromise on expectations and purchase a first property in an area further out from the city where land is more affordable. Considering our population growth and current future economic forecast, outer-suburban locations will continue to attract strong demand.

Keep your feet on the ground and be aware of the sacrifices property ownership entails before stepping in. If you’re prepared and able to tread the road, and have the ability to do so, it’s hard to beat the security that results from owning your own home. It’s just a shame more having been given the opportunity to do so.

Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition. 

Australia’s property market is in for a long, flat long road ahead

Australia’s property market is in for a long, flat long road ahead

By Catherine Cashmore
Monday, 07 May 2012

The Reserve Bank has decided to backpedal and heeded the demands of economists who have been up in arms ever since the central bank kept the cash rate on hold last month.  We had the usual surge of tables splashed over the front of the dailies highlighting the savings to the average mortgage holder should the banks pass on the full cut.  Sellers in the property industry are rubbing their hands together, expectantly waiting for prices to rise, and the focus for the next few weekends will be firmly on the clearance rate for any indication of a change in sentiment.  However, after all the celebratory drinks have been clinked over the table as those who “bet” on the exact basis point drop get their “told you so” moment, perhaps we can get back to reality. It’s unlikely we’re going to see a surge towards the property market – at least not in the near future.

It’s clear the RBA has lost some element of persuasion over the banks, with the statement that 50 basis points drop was to “encourage” the banks to at least pass a proportion of the rate cut onto customers. To all outside eyes, we’ve managed to end up with a system where the banks are in the controlling seat and the RBA’s influence and relevance to home owners is diminishing.  Wayne Swan has warned the banks to pass on the full amount – however, his threat can only be addressed with an “…or what?”. The banks no longer need to bow to the demands of those we voted into power – they are a ruling power unto their own interests and profit margins.

One minute we are exhorted to save, pay down debt, hunker down and tighten our belts.  The next we are told we need to march out and stimulate the economy.  Retail needs it, the housing market is apparently crying out for it – and Swan is dancing around as if he’s personally responsible for the whole charade, with his obsession with a surplus by 2012-13.

The drop would stimulate confidence it was reported; however, it does just the reverse.  It tells everyone what we already know: anyone not in mining is struggling – particularly if they own a small business, work in the retail and manufacturing sectors, or are one of the millions on the average Australian wage trying to service rental or mortgage payments.  For those struggling on the minimum wage (around 1.4 million people, or roughly one in six workers), it’s a lifestyle of ball juggling as it’s now well accepted that the majority of Australians spend at least 50% of their disposable income simply putting a roof overhead.

With the banks passing on a proportion of the rate cut, home buyers and mortgage holders will gain a marginal benefit in disposable income,  however unless your mortgage is in the top percentile, the drop is only slightly beneficial at most.  For the majority of new home buyers it does little to improve affordability.  Anyone who has managed to save a deposit is most likely out there shopping already – a lot of them dual income couples, high-income earners, or beneficiaries of a gifted deposit.  A growing majority of low-income earners are simply locked out while struggling to service growing rental yields.

In the recent Victorian budget, it’s welcome that more funds have been dedicated to dropping stamp duty costs by 30% for first-home buyers(details of which can be found here.) However, in order to do so, the government stripped away the $13,000 grant offered for the purchase of new homes. In light of the fact that new supply is essential for reducing competition and inflation on established stock, there’s not much to celebrate really.

Then again, as we’re told repeatedly, despite promises to the contrary, there isn’t as much in the coffers to hand out at the moment.  Ted Baillieu should be well adverse to the adage that you always “promise less and deliver more”.  However, apparently, due to the softness in the housing market, less than expected came in from stamp duty payments, therefore tough luck to the taxpayer.  The only way government, both local and federal, know how to raise money is to raise taxes.  To think outside the square never gets further than an expensive research paper. However, to be fair, much of Victoria’s problems did have their beginnings in poor management from previous administrations.

Different states offer a range of different policies for first home buyers (aside from Tasmania, which offers nothing outside the federal government’s $7,000 grant.)  All are introduced for periods of time, however all are subject to change by subsequent governments providing no confidence of consistency.  Some policies are better than others, however, the minimal assistance that is available arguably inflates the market rather than the reverse (as evidenced by the boom and bust cycles as various the schemes are introduced and subsequently scrapped).

Billions has been thrown at first-home buyers over the years, which is amazing when you consider evidence proves it’s not achieving the desired result.  Should the current trend continue, we’ll see today’s 35- to 44-year olds reach retirement with a quarter still renting – and when the 25- to 34-year-old bracket reach retirement, a third will still be renting. How long until 50% are reaching retirement while paying someone else’s mortgage?

If you’re reading this and already hold a mortgage you’re probably understandably too concerned with meeting your own bills to take a close look at the bigger picture that is growing to be a crisis of monumental proportions. Some may have read or heard about the latest Anglicare report that has taken a snapshot nationally to look at the supply of affordable rental accommodation for those on a low wage or on government allowances.  Not surprisingly, the results are truly dire – you can read the full report on Anglicare’s website – however the outcome emphasises “people on the minimum wage need two incomes to rent a house. In many places even that is not enough”.

Two incomes to rent a house? If you can’t rent on two incomes, you certainly won’t be in a position to buy – renting is still the cheaper option, and house prices are not reducing by any significant proportion to change this ratio.  In Anglicare’s report, it surveyed more than 65,000 advertised rental properties across Australia. For singles living on an aged or disability support pension there were no affordable options in any urban area across Australia, and for singles on the minimum wage the options were so limited that in Sydney, not even 1% of all the advertised properties met the requirement. This is in a nation envied worldwide for its prosperous economic status – one of the few that “beat” the recession.

I only have practical experience of the Melbourne rental market, which has a reported vacancy rate of 2.5% – this is up from 2.2% last year.  When it announced the latest vacancy figures, the REIV commented, “the reduction in population growth and increase in construction of new dwellings is now beginning to provide easier conditions for renters”. Well, it may look that way on paper, but in reality, it couldn’t be further from the truth.

The rental agency I deal with has demand at such a level that – whatever the condition – an advertised property will be marketed for no more than a few hours before numerous enquiries are received requesting and inspection.  It’s a common story repeated within every management company across the metro area.  Most recently, I witnessed a line of prospective tenants queue outside an old untouched one-bedroom-plus-study house that could can only be described as highly unsuitable for a family.

The location on a busy main road arterial, coupled with the “rawness” of the internal condition, including an oven that didn’t work and no laundry facilities, gave doubts it would attract any enquiry at all.  However, it rented after being on the market for less than a day. The successful application was a couple with a two-year-old child – both of whom had full-time employment.  They’d been looking for a number of weeks and offered to paint the property at their own expense by way of an incentive.

Current yields in Melbourne are advertised around 5% for inner-city apartments – however, other states such as Perth for example are easily achieving yields around 5.5% in inner city suburbs. To secure accommodation, it’s not unusual for many applicants to offer in excess of the advertised price.  For prospective tenants unable to provide an incentive, options are virtually nonexistent.  I can’t over-emphasise the problems this is causing.

It’s in the rental market, homeless numbers, and waiting lists for public housing, where you’ll find the true story of Australia’s housing shortage.  The buying market is simply a game of musical chairs as one established property passes to another.  New home sales are at decade lows because they’re situated in areas on the outskirts of the city where many can’t feasibly settle.  This is why we need to distinguish between “housing need” and “buyer demand”.

As the RBA points out in its latest analysis of the market, “rental vacancy rates have been around 2 per cent since 2009”.  It’s the consequence of years of poor planning that has squeezed everyone into urban areas close to centralised employment centers.  As such, we have ended up in a situation where rental applicants have to compete against each other to acquire some sort of shelter, a little like some pseudo form of the Hunger Games.

Under current conditions, whether buying or renting, “housing stress” is almost an understated term.  We all need a home and in this prosperous nation of ours, everyone should have access to feasible options to provide shelter for their family – whether renting or purchasing. If you have a system where growing numbers are unable to attain the basic essentials for their families without experiencing significant stress, there’s no room for innovation and development of ideas that are the key to increasing productivity and consequently a country’s overall wealth.

As always, it’s those most in need who come bottom of the pile – and based on the Anglicare report, we can now add full-time employees to that number.  The solution to the problem should not be concentrated on a market driven by incentives or tax breaks, which simply pits one buyer against another.

Instead, it’s important to start listening to local voices, real community needs.  To give one example, Point Cook in Victoria, located 25 kilometres from the CBD, was marketed as a “vibrant new retail and commercial development being created in Melbourne’s western suburbs”. Expected to provide housing for over 12,000 families and a 25-minute drive from the CBD, it’s been one of Melbourne ‘s fastest-growing residential areas.

However, the residents that moved there discovered the 25-minute drive is only applicable if you leave for work at 3am, otherwise – with only one major road in and out of the suburb, it can end up being a two-hour commute.

The residents are crying out for more roads, schools, leisure facilities, and so forth, however the house building continues and as more families move in, the problems worsen. Unfortunately, there’s no end in sight for Point Cook residents.  In the recent Victorian state budget, Melbourne’s fastest-growing region was completely overlooked. No one listened.

As such, it’s no surprise that turn over in some areas of the suburb is three times the Melbourne average and land banking from speculative investors (or residents “changing their minds”) has resulted in many empty lots sitting undeveloped.

Considering the billions of tax incentives and home owner grants that have been handed out over the years, it’s clear protecting growing house prices has always been a priority – and building thriving communities has not.

From an outside perspective, Australia’s land mass, wealth, skills shortage, ageing baby boomers, along with many regional locations simply crying out for an increase in population, I’ve always seen ample opportunity to channel population growth to our social advantage.  However, it’s clear that successive governments have judged the health of our economy as figures on paper not adequately planning for our growing community’s needs.

The wealth of any nation should be judged on the standard of living provided for all – not a select group.  Seeing as we can hardly cope with housing those who already live here, and as there is no reasonable policy shift to aid a rapid improvement of the situation, perhaps it’s time to close the doors all together aside from fulfilling our obligation to provide refugee protection? Based on current data, the population would stabilise around 2050, however in my mind, it would be a terrible admission of failure.

As for improvement in the housing market, well, don’t look at clearance rate figures for a sign of recovery, instead look towards the polls. Because only when people feel their voices are heard and basic needs provided for (without breaking the bank), will the polls improve and confidence return.  Until such a time, we’re in for a long, flat road ahead.

Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.

Foreign investors banking wealth in Australian real estate and hurting affordability

Foreign investors banking wealth in Australian real estate and hurting affordability

By Catherine Cashmore
Tuesday, 01 May 2012

Two weeks in a row now I’ve written about affordability issues seriously affecting our home-buying market – principally first-home buyers who, without some kind of family assistance to help with a deposit, often find themselves on the wrong side of the real estate ladder.

Call me a pessimist, but when it comes to Australia’s housing market, if often seems like an insurmountable problem that successive governments find “too hard” to change within their short-term outlook.  It’s not through lack of educated advice.  We’ve had the Henry Tax Review that recommended changes to negative gearing, which, as I pointed out lastweek, needs to be scaled down to ease inner-urban inflation.

In addition, various investigations have been made into the problem of effectively increasing affordable housing stock – such as the McKell Institute’s Homes for All report.  However, they all call for changes that risk polarising opinions and shortening terms in power and as with negative gearing, pressure for policy change continually falls on deaf ears.  Therefore, instead we tend to see solutions employed to bandage over the issues rather than providing any long-term outlook.

Measures such as first-home owners’ grant, which result in quick bumps in inflation followed by fairly lengthy periods of correction, seemingly provide short-term optimism, but over the long term simply escalate the underlying issues of affordability.  Other initiatives such as the national first-home buyers’ savings scheme are worthy ideas, however it was set up in such a way that when first introduced, stringent conditions initially placed limitations on home buyers’ options, thereby deterring significant take up.  Although improvements have since been made, poor marketing and less than a 5% take-up has resulted in many banks withdrawing the option all together.

Of course, you could choose to travel outwards and live in paddock land where real estate is cheaper and houses generally bigger.  However, as numerous media reports have publicised, the woeful lack of community facilities and long commute times to inner-urban employment centers have allegedly resulted in serious medical conditions such as obesity and depression.

OF course, all of this is only going to affect you if you’re a first-home buyer.  Second-home buyers have existing equity to assist them up the ladder, and investors sit top of the pile with generous tax incentives and an increasingly tight rental market to assist cashflow.  The Age recentlyhighlighted the lengths some will travel to run loops around the tax system, with a proportion of investors allegedly structuring loans to divert  rental income from their investment properties directly into their “home loans,” thereby clearing the way to claim a larger slice of tax-deductible expenditure from payments on their investment loan.

There are all sorts of stories of those who try to beat the system. It wasn’t long ago we heard of stories of those illegally claiming the first-home owners’ grant.   Furthermore, Australia’s obsession with seeing housing as a model merely for investment has managed to reach such lengths that we now have a daily house price index specifically modeled to be openly traded on the stock exchange, allowing punters to “bet” on short-term price movements, encouraging the continued obsession with property speculation.

Land banking is another wondrously spruiked initiative – not so bad if you’re securing an older-style house in rentable condition and enabling a tenant to live in the home until it’s either sold or developed.   However, we have no indication on numbers of inner-urban land sites purchased by investors who allow derelict property to sit vacant whie waiting for population growth to inflate the investment as the surrounding finite land gets subdivided into smaller and smaller lots.  The UK market is fast getting initiatives in place to combat this issue; however, it took significant media and people power to start the process rolling.

Recently Robert Doyle – lord mayor of Melbourne – took to the battle ramps to penalise owners of un-used, un-livable, property who allow the homes to sit vacant for years on end.  The owner of a derelict site in Melbourne’s CBD – the old Savoy Hotel on the corner of Bourke and Spencer streets – was approached by the council to turn the area into a playground until the site is sold.  It would enable the land to at least be used by the community until a decision has been made. Needless to say the owner turned down the proposal, preferring to let his eyesore fester. Melbourne City Council is now under pressure to employ a new rates system that will penalise the behaviour. It sounds hopeful, however hope and good intentions are easy to sell and as we all know, often seemingly hard to implement.

However, out of all the models of investment that inspire healthy, contentious debate, there is nothing quite as igniting as foreign ownership of Australian assets – and in particular, residential real estate.  In the latest annual financial report from the foreign investment review board, we learn that in 2010-11 10,293 proposals were received, of which the majority (9,771) were approved for residential real estate.  There is a spike in the figures between 2010-11 compared with 2008-09 simply because hotly contested changes to the rules for temporary residents wishing to purchase property were relaxed by then prime minister Kevin Rudd in the previous year.  Therefore we have no idea of the 2008-09 figures, which – considering relaxation of requirements – were no doubt higher.

Despite the recent doldrums, foreign investment in residential real estate is the playground of the wealthy.  Recently a report by Colliers International outlined that with “an unemployment rate of 5.2%, annual GDP growth of 2.5% and higher yields for prime-grade assets, compared to other global markets’ Australia’s property market is viewed to be particularly attractive”.  CBRE –  “the world’s largest commercial real estate services firm” – earlier this year reported in The China Daily that “more than 1,200 apartments were either planned, being marketed or were under construction by Chinese companies in Australia in the fourth quarter of 2011”.  Accordingly, the company goes on to say: “Foreign developers made up about 30% of the Australian market last year, and China took up 9% of that – an increase over previous years.”

Asian buyers are active in various markets across the globe and principally in Australia because we possess something they don’t have in China – “freehold” laws.  In China, purchasing residential real estate not only requires large deposits as a down payment (some 40% to 50%), the laws surrounding Chinese property ensure there is no private ownership of land, only “rights” to use that land and no guarantee it won’t be whipped away by the government if so desired.   Therefore, as a sales agent from J P Dixon in a recent ‘China Daily’ report so eloquently said: “”Unlike in China, once a buyer purchases property in Australia, it’s theirs forever and can be passed down from one generation to another.”

When you read the requirements published by the FIRB for the purchase of established residential real estate in Australia it seems very straightforward.  For established dwellings, there must be a commitment from temporary residents to use the property as housing and if not seeking permanent residency in Australia at the end of their term, sell the home.  Foreign relatives may purchase on behalf of those with temporary visas under the same requirements.  Companies can also purchase established dwellings as long as the property does not sit vacant for more than six months. If so, it must be advertised and leased on the open rental market.  The application process is simple.  An online form is used and a few boxes need to be ticked requiring the purchaser to disclose intentions for the home.  As can be seen from the figures, putting aside those who withdrew applications, only 42 applications for residential real estate were rejected. Huge numbers are clearly taking advantage of the ability.

It’s interesting however to ponder how many fall through the net. As much as property has been in the doldrums of late and even accounting for our strong Aussie dollar, due to the shortage of land surrounding our capital city locations, property is viewed as a low -risk investment and a safe haven for foreign investors to “bank” their wealth.  In an economy that’s performing as well as ours in comparison to Europe and the USA, coupled with a shortage of live able desirable land plus strong population growth, the prospect of losing money in a property investment long term is a low-risk proposition.

I know from experience in my own field of work, enquiry from the foreign market – in particular Asia – is in abundance, and seeking FIRB approval seems to be a simple online  “take my word for it”,  “box-ticking” process.  For example, those who don’t employ the services of a buyers’ agent (most of whom will check if the client has a legal right to purchase for reasons of liability) will find that when purchasing established or new property – they are not asked for ID when filling in a contract, or evidence they are an Australian citizen or even permanent or temporary resident!  All that most agencies require on a real estate contract is a signature and deposit cheque for – “ideally” – 10% of the purchase price.

A solicitor or conveyancer acting on someone’s behalf is not required to check his or her viability to purchase Australian real estate. Even for those who have been approved by the FIRB  at the present time, there is seemingly no follow up process to ensure the “box-ticked” rules are being adhered to. All we are told in the FIRB financial review is the board is “moving toward a systemic series of targeted investigations of non-compliance by foreign investors.”

Therefore, at the present time, who checks if a property has been sitting vacant for six months or more?  Who establishes whether a home purchased by a temporary resident is sold when they leave the country or simply sits vacant?  In view of the numbers, ongoing regulation under the current system would require significant manpower and considering proof of ID is not a usual requirement when buyers purchase a property, keeping tabs on those who never applied for FIRB approval in the first place would likely fall through the net of observation.

Having said this, in Australia, simply having rules governing foreign investment of established residential real estate is a step ahead of other countries that have no special requirements.  In London for example, anyone can purchase property and the luxury real estate market is booming. Last year a penthouse apartment was sold in Knightsbridge for £136 million and throughout the course of 2011 over £4 billion was transacted by foreign purchasers in the London market, costing the treasury over £750 million a year. Other countries such as Canada and the USA also have no restriction.  In light of this, we should consider Australia on the front foot.

There’s no getting away the fact we sit top of the pile when it comes to issues of unaffordability in the housing market, we have falling numbers of home owners and increasing numbers getting stuck on the rental ladder.  It’s been principally caused by poor planning policies, squashing our population around the capital cities where prices are out of reach for a growing majority.  It’s one of the many reasons we’re heading into a crisis in terms of rental accommodation and public housing.  A shameful position for Australia to find itself in, with larger proportions of our population living in conditions more suited to Third World developing countries than a leader on the world stage.

It’s an issue of many parts and I see nothing wrong with encouraging foreign ownership if it’s going to help increase new supply. However we know from the figures, purchasing established real estate is the preference of the largest percentage of property investors (including foreign investors looking for capital growth) and therefore it stands to reason, to allow more first-home buyers into the market, we should be limiting competition in this sector to slow down inflation and ease supply.

Good supply of rental accommodation is always important, but let ownership of established stock be closely monitored to limit imbalance in the marketplace. If the ability to monitor foreign ownership of established stock – ensuring it’s being utilised in line with current policy – isn’t there, it’s arguable whether we should allow it in the first place?

Real estate prices rising above inflation are not good for the home buyer – only for the seller looking for a windfall, or the speculative investor.  Let’s keep housing’s primary purpose top of mind when designing policy initiatives and ensure our limited established stock and precious inner-urban land favours those who require a roof rather than a speculative investment.

Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.