Contributed by Joe Montero
House prices and rents continue to spiral up, wages are still being held down, and income has been cut for those out of work. In short, many Australians continue to become poorer.
A consequence is that the ability to secure a proper home is being undermined.
Medium house rents are now $18 higher than they were q year ago. This may no seem much. But when rents have already through the roof, and other costs of living ate rising with it, the increase translates into less spent on, food and other necessities.
An elephant in the room is that many households and individuals are surviving by going further into debt, when it is already at an unsustainable level.
Statistics don’t tell the story of the human cost and Covid-19 have taken the housing and debt crisis off the national spotlight. The crisis is still here with us.
Rents are going up because the price of real estate is going up and there is not enough affordable housing stock available. Any answer, therefore, needs both to be taken on.
The only reprieve is a small fall in housing prices and rents in Melbourne and Sydney, attributed to a decline in population increase and the absence of overseas students since the pandemic. This does not change the overall picture.
It cannot last. House prices and rents are continuing to be pulled up artificially because the taxpayer is funding property owners through generous capital gains tax exemptions, negative gearing provisions, and the shortage of government provided stock. There is also a near zero rate of interests to encourage more borrowing.
The impact of these artificial measures is being heightened by the poor state of the economy, where investment in real estate has cushioned investors against loss in other areas. For the economy, the problem is that the rising cost of housing in being financed through debt, and this cannot go on for ever.
There is an answer. But only if attention is turned to properly removing the props. Capital gains provisions must be means tested and pulled down. Negative gearing must be scaled down and eliminated. Government must adopt an ambitious plan to boost low rent public housing stock and non-private social housing.
Housing would be made more affordable. A greater proportion of income would be available for spending on other needs. The pressure to increase debt would lessen. These changes would be good for people and the economy.