First-timer grants aren’t helping affordability: report
Posted on Tuesday, January 21 2014 at 8:56 AM
Not enough is being done to improve housing affordability in New South Wales, according to a report prepared for government.
The House prices, ownership and affordability: trends in New
South Wales briefing paper suggests grants targeted towards first
homeowners haven’t been effective in improving affordability.
“With continued pressures from population and
household income growth, demand is likely to be reduced only by reducing the
attractiveness of housing as an investment asset,” the report’s author, Andrew
Haylen, says.
The paper highlights an ongoing struggle with
affordability since the 1960s.
“As evidence, between 1960 and 2006 real house
prices increased at an average of 2.7 per cent annually, ahead of 1.9 per cent
growth in per household real incomes.”
Despite a sluggish performance in 2010, there
has been significant growth in house prices for some time, the report notes.
“Prices in most capital cities stabilised toward
the end of the late 2000s, but record low interest rates have contributed to
strong growth in housing prices over the past 12 months.
“This price growth has been most pronounced in
Sydney where the median established house price has increased by around 15 per
cent since December 2011.”
The document says financial deregulation and
changes to the tax system have resulted in increased activity by investors
since the early 1990s, with overseas buyers now influencing prices too.
“To illustrate, in 1985 investors accounted for
only 13 per cent of total housing finance in Australia; as at November 2013,
investors accounted for 38.5 per cent of total housing finance.”
The paper advises improving affordability
through addressing both supply and demand to avoid an ongoing lack of
affordability.
“With interest rates at the bottom of the easing
cycle and price growth expected to continue, the affordability problem is
unlikely to improve significantly in the next few years.”
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