Great Australian Dream becomes unrealistic as real estate and mortgage costs spiral

With housing affordability and mortgage rates now an election issue — and with house prices falling in Sydney's battler electorates and a Labor poll showing high rents are eating into people's incomes in marginal seats — experts warn the problem will get worse. They also say it might be permanent.
They warn that it will create an eastern seaboard pocketed with ghettos that will lock the have-nots out of housing, and spell the end of Australia as an egalitarian society.
Peter Brain, executive director of the National Institute of Economics and Industry Research, said housing problems were the result of loose monetary policies that had extended easy and cheap credit including mortgage loans, home loan grants and cuts in sales tax that had driven up prices, and 30 years of neglect by governments on infrastructure.
"I do not see an easy way out," Dr Brain said. "Building infrastructure is a 10-year program of upgrading rail, public transport and freeways.
"With good planning starting today, and with appropriate government action, it would take 10 years.
"It's going to take billions upon billions upon billions and the idea of giving tax cuts is just so immoral, because what you are doing is condemning an increasing segment of the population to a ghetto existence with not enough time or material resource to access what's their basic right."
The warning comes as the Reserve Bank board meets on Tuesday week to determine whether there will be another interest rate rise. Following new inflation figures last week, the market seems to be now saying it is a lay-down misere.
Trading on the SFE 30 Day Interbank Cash Rate Futures contract on Friday showed the market had assumed a 73 per cent chance of a pre-election interest rate rise next month.
Political parties and experts have come up with their solutions to the problem.
The Howard Government has promised a shake-up of public housing by forcing the states to compete with the private sector for $1 billion of federal funds. Opposition Leader Kevin Rudd's ideas include an Affordable Housing Agreement with states and local governments.
Other ideas include ANZ economist Saul Eslake's call to make interest payments made by first-home buyers tax deductible if they promise to pay capital gains later, and billionaire apartment king Harry Triguboff's suggestion that young people should be allowed to delay compulsory contributions into superannuation to save a deposit.
But specialists say there are no easy solutions.
While a report by economic forecaster BIS Shrapnel last week warned the national rental squeeze will last until at least the end of this decade, they warn the crisis may last longer, perhaps permanently.
KPMG demographer Bernard Salt said the problem was driven by changes in the shape of Australian households, and the fact that Australian cities were now becoming global.
The family unit is now increasingly being overtaken by singles, childless couples and gay people with more money to spend who can force up the prices with their demand for property, he said.
"You can't stop social change and the key driver here is social change," Mr Salt said.
"I can't see any reason why this won't continue step by step, inch by inch, certainly for decades to come."
Mr Salt said this signalled the end of two visions of Australia: as an egalitarian society, and secondly a country where everyone had the right to own their own home. The outcome here is social stratification, at a geographic level.
"If you simply cannot afford to live in Sydney, you move out. If you can't afford to buy in Melbourne, you move out. So then you have families, the poor, even the lower middle class being relegated to cheaper options outside the city."
"The social structure of Australia must change, even the notion that we are an egalitarian society where everyone has equal access to housing. That may well have been the case in the '50s, '60s, '70s and '80s but that may not be case in the 21st century. I can see actually quite significant social division in Australia. We might not think it, but I reckon in 20 years time, we will look back and say this was a pretty good time in history with prosperity, job opportunities."
Source: The Age