"As a 25 year old I should be the first one to whinge about housing affordability."

No Realist, you should not. It is income related not age related.

If you earn the minimum wage (for arguments sake $500 per week)how do you make the $832 weekly repayments (100%, 30 year mortgage on the median $500,000 house). If you make the average (about $1000 per week) $168 left to live on.

The housing cycle does have its ups and downs, at present we are in a slump (if you exclude WA) with house price increases less than inflation. People in Sydney with negative equity are being advised to "walk away" from their homes.

GST and the $14,000 first home owners grant raised the price of a new house by $30-40,000 overnight, real estate agents are charging a percentage of the sale price as commission.

There is no point in having 100% equity in an asset if you cannot sell it because nobody can afford to buy it.

Realist

Yes there is an aggressive lending market and it is very easy to obtain funding. But is this good in a regime where prices are artificially much higher than they should be? It is all too easy to lock yourself into big payments for decades, and in a rising-interest-rate and rising-prices-of-everything regime.

“As property is the basis of wealth for most Australians, you are discouraging and robbing these people of a fundamental asset that will assist in their prosperity.”

Eh? This is happening now. This is exactly what Andrew Bartlett is concerned about.

“I find it appauling that you are in a position to discuss these issues without any real insight on the topic.”

But…. anyone and everyone has the right to raise these issues, regardless of how well versed they are in them. Crikey, we don’t want to restrict article writers to only experts, do we? That would eliminate practically all politicians for a start! And we need to encourage our pollies to partake in discussions on this forum.

--
ghaycroft,

“Work out a town plan then simply let anybody who wants to, within that town plan open up and develop the land for house building without the costly beaurocratic delays and restrictions that ramp up the development costs.”

One of the core purposes of a town plan, in towns that have growth pressure, is to carefully regulate land releases, and certainly NOT just free them up. Land releases need to go hand in hand with infrastructure development, service-provision and an overall plan that considers population pressure, environmental impacts, etc. Thus, land releases need to be very carefully managed.

Freeing up land for housing is not the answer.

Perhaps Andrew is wrong.

Perhaps home/unit/appartment ownership will, in the future, be a for the lucky elite. Let's face it, the egalitarian ideal of home ownership is only a recent occurance in history - a failed social experiment.

In response to some of the comments:

I think Realist's assessment will deliver a nation sharply divided between those who own housing/property and those who don't. The gap is already getting quite large. Stopping housing from becoming (more) excessively expensive does not "rob property owners of a fundamental asset that will assist in their prosperity" - it stops many people who can't afford to get into such investments from becoming impoverished just keeping a roof over their heads.

The other point is that the public purse already heavily subsidises housing investors, who broadly speaking are the wealthier Australians. We spend far more through forgone revenue with negative gearing exemptions than we do on public and community housing. Rather than take an ideological position of private good/public bad (or vice versa), we should look at what is the best and most efficient way of using that public money. A previous Industry Commission report suggested public housing was the most efficient, and I imagine that analysis would still hold. However, changing the mix in the various subsidies and incentives - rather than supporting only one or two - would probably produce the best results.

Of course, if it was proposed to just abolish all forms of government support for housing, including all grants, tax discounts, deductability, etc, the screams from the top end of town would easily drown out the cries from those in public housing.

As for having population policy, I've always been in favour of that. However, we already have a good idea of what the population is likely to be in the next 20 years, and where the growth is likely to happen, which is sufficient to develop a national housing strategy on. Decisions can be made that will change population projections and location, but that shouldn't stop us planning a strategy now based on what is likely to happen.

A national housing strategy should have environmental sustainability built into it as a matter of course, but if people can't afford to even get into secure and appropriate housing in the first place, then it's a bigger problem.

'Realist', I can see three blatant contradictions in your arguments so far! Keep it up, for my amusement please.
Fact - regardless of the middle-class welfare of negative gearing, house prices cannot eternally grow faster than wages. Over a very long term, they will simply track wage growth, with fluctuations above and below this long-term growth average. Today, they are well above any rational valuation. This is the result of many years of growth above the rate of wage inflation. The implied future is for growth below the rate of wage inflation. Most likely 'negative growth' - as in, falling nominal prices, but possibly just decades of stagnation. Either way, borrowing costs (interest) will exceed capital gains.

"As property is the basis of wealth for most Australians, you are discouraging and robbing these people of a fundamental asset that will assist in their prosperity."

No, it is these very 'fundamental assets' (or the associated debt) that will result in many tens, perhaps hundreds of thousands of families losing their homes. What is the current figure in NSW? Around 5,500 from memory and a 50% increase in a year!

"I hope that people have taken the initiative and have invested in property to assist in funding their retirement."

How does a loss of ten or twenty or five-hundred thousand dollars "assist in funding their retirement."

You're far too young to remember anything but a booming economy. Ideal fodder for the perfect storm that is approaching. Watch and learn.

F.

It's a little disappointing to see, yet again, the chorus of comments from those who believe the silver-bullet solution Australia's problems is population control.

The thinking seems to be:
Q: "Why does this problem exist?"
A: "People!"
Q: "What's the solution?"
A: "Fewer people!"

Unfortunately that notion, with its circular logic and its one-dimensional outlook, could be applied to just about any issue you can think of, so it has zero analytic power as a means of comparing the value of different possible solutions.

But I guess when the only tool you have is a hammer, everything starts to look like a nail...