Aussie John has a plan to fix housing affordability

Aussie Home Loans boss John Symond said yesterday he had presented Prime Minister John Howard with a solution to the problem because years of political buck passing had led to inaction at all levels of government.
Mr Symond's plan would give first-home buyers a tax deduction of up to $4725 a year for five years on annual home loan interest repayments of $15,000. That equates to a $400 monthly saving, reducing loan repayments from $1900 to $1500 on a $300,000 loan.
The maximum benefit would be available for new homes or units worth $200,000 to $500,000.
After getting on top of their mortgage repayments, borrowers would pay back half the benefit over the next five years - a maximum of $200 a month or $2362 a year.
"Housing affordability today, in all my 30 years in the business, is the worst it has ever been for first-home buyers," Mr Symond said yesterday.
"If we sit by and do nothing the crisis just deepens - that's what's happening at the moment."
Mr Symond met Mr Howard in Sydney for an hour on Tuesday to present him with the report and detail how the proposal would work.
Mr Howard yesterday told The Daily Telegraph he was interested in the proposal and would have a thorough look at it before releasing his own policy on housing affordability.
"I haven't made a decision, I'm not saying 'yes' or 'no' but I always look at something that John Symond puts forward," Mr Howard said.
"He's a very public-spirited man, he's contributed a lot and I always take his ideas seriously."
The scheme would cost the Federal Government $505 million per year and would be open only to people buying new dwellings - in an effort to stimulate construction and increase housing supply on city fringes.
Opposition housing spokeswoman Tanya Plibersek said the more that experts contributed to solve housing affordability the better.
"It's a very important issue for many Australians and the Government has been unwilling to propose any solutions of its own," she said.
The plan has been in development for the past four months in conjunction with economic analysts BIS Shrapnel, which yesterday predicted the Reserve Bank of Australia would raise its cash rate from 6.5 per to 7.3 per cent by 2011.
"Substantial interest rate rises in the next 12 months is unlikely but the risk is, if we've got strong construction activity, that they will rise significantly by 2010/11," BIS Shrapnel boss Robert Mellor said.
He estimated the number of Australians aged between 25 and 35 years - the average first home buyer age - would increase by 36,200 over the next five years.
Source: Daily Telegraph

Mortgage rate rise makes Australian Government defensive

The Reserve Bank of Australia this week put the cash rate up 0.25 per cent to 6.5 per cent.
As mortgage interest rates jump to 6.5pc the Federal Government has tried to cover its political difficulty over today's interest rate rise by accusing Kevin Rudd of being a Liberal.
As soon as the Reserve Bank of Australia (RBA) announced the fifth interest rate rise since the last election the Opposition started making political capital.
In Question Time Kevin Rudd reminded the Prime Minister of the 2004 Liberal Party advertisement promising to keep interest rates at record lows.
"What does the Prime Minister regret most, making the promise or breaking it?" Mr Rudd said.
Mr Howard distanced himself from the advertisement, saying he did not personally make that claim.
"The most definitive thing I said in the election campaign of 2004 was in answer to a question from Neil Mitchell - 'so you wouldn't be embarrassed to win the election and then to have an interest rate rise?', answer: well I don't seek to give guarantees/judgements about individual movements - my argument is that they will always be lower under our policies," Mr Howard said.
Treasurer Peter Costello hit back at Mr Rudd by mocking his claim to be a fiscal conservative.
"We have a leader of the Opposition whose dearest wish is to be a Liberal," Mr Costello said.
The Government says despite today's rise, rates are lower than the average under Labor.
Another rise tipped
It was the unexpectedly high June quarter Consumer Price Index (CPI) that sealed the case for higher interest rates, amid buoyant economic activity.
In raising the cash rate to 6.5 per cent, the RBA also played down the impact on the global economy of credit market problems in the US.
Pricing on local credit markets indicates a belief the central bank could move again by the end of the year.
The chief economist of nabCapital, Rob Henderson, agrees it is a risk.
"Possibly they need a more restrictive monetary policy setting than they have now," he said.
"But I don't think they'll know that until into 2008, or possibly very very late in this year."
Industry, union response
The Australian Chamber of Commerce and Industry (ACCI) says it hopes the increase will forestall the need for any more adjustments for the next year at least.
ACCI chief executive Peter Hendy doubts the rate rise will affect business confidence levels.
"We only yesterday put out our business expectation survey for the last quarter," he said.
"It had the highest business confidence levels for eight years and in fact, plant and equipment investment prospects were the highest for 14 years.
"Ironically, they're increasing interest rates because the economy is going so strongly.
But Australian Council of Trade Unions (ACTU) president Sharan Burrow says the rate rise makes today a frightening day for families.
"Working families know that the IR (industrial relations) laws already take away their job security, their income security," she said.
"This increased debt on top of everything else is just going to make people very frightened."
Housing affordability
Meanwhile, the National Affordable Housing Summit chairman says house prices across Australia are increasing at an unacceptable rate.
Professor Julian Disney says the figures are not surprising.
"They're just illustrating how low the manic boom of a few years ago has slowed down," he said.
"Prices are still going up much faster than is acceptable and a lot of people are going to be overcommitting themselves."
Source: ABC

Queensland housing affordability on a downhill slide

Queensland residential real estate developers say there has been a substantial slide in housing affordability across the state in recent years.
The Urban Development Institute of Australia has today released a new national affordability report.
It charts the change in affordability of 70 centres in Australia between 2001 and 2006.
Institute state president Brian Stewart says the change in Queensland mirrors that in other states.
"We've moved from a situation in 2001 where 83 per cent of homes sold that year were affordable to families on a median salary, to a situation in 2006 where they can only purchase 27 per cent of the housing stock in Queensland," he said.
"That's [a] very substantial slide in affordability."

Source: ABC

Rents are rising because property investors have cashed out to reinvest in Superannuation

House rents have risen at their highest rate in 18 years because investors have sold property assets to boost their superannuation, housing economists say.
And an interest rate rise next week would make buying a home even harder for those hit already with higher rent.
University of Sydney economics faculty academic and housing specialist Judy Yates said Treasurer Peter Costello's super laws encouraged investors to pull out of the housing market just when rental demand was growing.
"Just at a time you had increasing demand for rental properties, you had a cutback in rental properties coming into the market," said Associate Professor Yates, who is also an Australian Council of Social Service housing policy adviser.
Under changes to superannuation laws, investors could deposit up to $1 million post-tax into their super before June 30.
Since then, a $150,000 post-tax super limit has applied.
Housing Industry Association (HIA) chief economist Harley Dale said the high cost of residential building had made one-off superannuation contributions a more attractive option.
"There's no doubt that in the first half of the year, the superannuation laws did divert funds away from other areas," Mr Dale said.
"Rental investment property was one of these. There's a bit of coincidental timing."
Rents rose by 1.6 per cent in the three months to June to record their biggest quarterly jump since September 1989, the Australian Bureau of Statistics revealed in its consumer price index release last week.
Mr Dale predicted rents would climb at a faster pace in coming quarters, even though investors have lost their chance to make a $1 million post-tax super contribution, as building costs remained high.
But a Hobart-based researcher with the Australian Housing and Urban Research Institute Keith Jacobs said diminished funding for public housing also had pushed up rents as competition for accommodation intensified.
"The reason why you have such a rental increase is because the opportunity for low-income households to rent in the public sector is very, very limited," Dr Jacobs said.
The HIA argues that rental affordability is low because land prices are up to four times that of building costs.
Dr Jacobs refutes the HIA's call to release more land, saying this would favour developers who are more interested in building homes for wealthy owner-occupiers.

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

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