There has been only a slow increase in population in Australia over the past few decades, but housing is now becoming unaffordable.

I doubt if releasing land is going to do much, but there is a noticeable trend in demographics. I cannot find the data now but I remember reading that about 60% of Brisbane households will be single person households in a few decades. With so many individuals living in their own unit, it will certainly increase demand, which will then push up house prices further or keep prices just as high.

As well, single person households are probably the most impoverished, particularly if that person is on a pension.

“Almost half of households (in receipt of social security payments) pay between 30 per cent and 50 per cent of their income on rent. In terms of how different household types fare in this analysis, single person households have the highest rate of affordability problems; couples with children have the lowest.”

http://www.build.qld.gov.au/smart_housing/news/updates/2005/nov/page13.asp

But as well as adding to the housing demand, single person households consume the most water.

“The research conducted by the WSAA found that in Melbourne, a single person consumed an average 220 litres daily indoors, a second person in the same household used 176 litres, and a third and subsequent householders use 110 litres.”

So, to solve a number of crisis concerning housing and also water, maybe the government should introduce a policy of “Get married - Stay married”

Many factors have contributed to the housing affordability crisis but here are a few of the principal ones.
Firstly, there is the value placed on land when it becomes available for housing development. This valuation seems to have no relationship to the value of the land for any agricultural purpose. Speculation in vacant land is a case of the older generations taking unfair advantage of the young. The young were not about when a particular piece of land was available cheaper than it is now. I am not sure what should be done about this but a redistributive tax on capital profits on land speculation should be part of the solution.
A second major factor is the rate of increase in the loans or assets books of financial institutions. Allowing financial institutions to determine the rate at which they can create loans by letting them set the rate at which they can expand their capital adequacy, has led them to seek extraordinarily high profits from excessive charges. Those profits over and above that necessary for a reasonable dividend can be added to their capital base. A multiplier is at work and for each loan category this multiplier is the inverse of the capital adequacy ratio for that category.
For the last eight years at least the banks have increased their loans by 12–15% per annum compound. Is it any wonder that money has lost purchasing power in the housing asset market? This particular problem has been caused only by Commonwealth Government policy. It was John Howard who commissioned the Campbell Report into the deregulation of the financial industry although the Hawke Government put the Campbell recommendations into effect. I assume that the Fraser Ministry had more sense. -More

Continuing-
The fundamental argument is that money is not something that is produced in a manner similar to guns and butter, or subject to the economic choices that the production of real goods entail. Creation of money is subject only to prudential considerations and as such should be the subject to sufficient regulation to ensure that money's value is maintained reasonably steady. We need to move away from a self-regulation system based on capital adequacy ratios to something similar to the old statutory ratios system which allowed the government, or the Reserve Bank, adequate controls over the actual money supply as long as it applied to all takers of monetary deposits. The Campbell report advocated dumping the statutory reserves system and adopting a system that could only have been invented by bankers, hardly economists interested in the welfare of the hoi polloi.
Another significant cause is failure to effectively apply tax law to negative gearing. The Tax Commissioner has some power to ensure that interest charges are allowed as a tax deduction only if there is the prospect of the activity being profitable in a reasonable time frame. Allowing those on high income to compete for properties, while their interest bill is tax deductible, against home-seekers for whom the interest bill is a non-deductible burden is inequitable.

Two things are behind this.

1) Easy credit.
2) People buying more than they can afford.

The 'great Australian dream' of owning a home, is, unfortunately, always going to be beyond the reach of some - this is why it is 'the dream.'

Unfortunately, almost anyone can get a loan these days. The sad fact is, this isn't how it should be. The simple mathematics of supply and demand mean that if lots of people are buying houses, the price is going to go up.

If credit institutions were more stringent on who they lend money to then this wouldn't be nearly as much of a problem as it is now.

Sometimes, you just have to say no.

"Speculation in vacant land is a case of the older generations taking unfair advantage of the young." No, its just a case of the early bird gets the worm. You dont think this generation of young people will do exactly the same when they are older?? There is a tax on capital profits, for any asset purchase post Sept 1985 - called capital gains tax. Those that have made big profits, get slugged by this, at their marginal tax rates, so the wealthy pay a higher rate than those poor that might simply have been lucky with a good purchase years ago. Its reasonably fair.

In relation to negative gearing, it is not just the wealthy that use this. In fact from what I have seen, the wealthy are more likely to invest in holiday homes (for rental income) rather than ordinary housing and in the share market. It is often fairly low income-earners that branch out into the rental market. Eg a council worker I know owns his own home, plus 5 rentals. He makes around $45,000 a year from his job. Not rich by any stretch of the imagination. To remove negative gearing from the rental market will ensure that many investors would need to further raise rents, only tightening the rental squeeze

Most of the solutions proposed by this article are likely to be costly and ineffectual.

Prices are rising because demand growth is faster than supply growth, with the bulk of evidence pointing to supply constraints as a key cause of recent price spikes. In this environment, tax breaks and subsidies that boost purchasers’ buying power will add to demand and simply disappear in even higher prices, leaving the prospective purchaser no better off. More grants and subsidies are not the solution.

Likewise, more public housing may help to alleviate the problem for a small number of stressed households, but governments don’t have the resources or capacity to expand to meet current demand. Anyway, the housing industry can’t meet current demand, and governments face the same capacity blockages as the private sector.

Governments are encouraging infill development, but it has clearly not been effective in meeting all of the growth in demand.

And ideological hostility to “urban sprawl” has prompted government to choke off traditional sources of low-cost new housing on the urban fringes, which some analysts say is the largest single reason for the decline in affordability in the first place. (see for example http://www.onlineopinion.com.au/view.asp?article=4811)

Hardest hit of all in the housing market today is the Indigenous people of this land, who had their land and economy stolen from them to create this country in the first place.

Unable to travel to the city without a permit to find a job that paid less wages than a white person, an Aboriginal person was unable to own land by reason of his colour until way after 1967.

Unlike many whites who lived in public housing and were able to buy their houses, at subsidied rates by the taxpayer in the sixty's and seventy's. Government attempts to assist Aboriginal people in the past to purchase housing has met with open hostility from the public and the press even today.

Therefore why should my taxes be used to assist white first home buyers to purchase a home or subsidies investors. Cut the demand and the prices will fall and limit small investors to two homes and that should even things out.

I can't afford to own a house in county where my family have lived for thousands of years, my twenty - years in the armed forces came to nothing, so why should I be helping out some invader through my taxes to buy their first home. Spend less on the arts and multi cultural functions and purchase factories or other dewelling and convert them to housing without the need to rip up the bush. The last thing we need is another cheap development without public infustructure.

The economy is a house of cards, occuppied by consumer junkies addicted to DEBT.

Eat, drink and be merry.

Have babies, so they can make babies who can pick up the tab. Hmmmm, or not.

The beast needs more and more debt to keep going. Central banks keep the tap running and the credit keeps flowing. More money, loose credit, slack lending. Prices go up.

US Fed doles out the dough at every threat of collapse and keeps us living blissfully unawares, at a comfotable distance from the precipe. Last drama occurred a couple of weeks ago with sub-prime machinations bursting a few bubbles. Some scary daze for those retirement folios. A LOT more buried in there, lets hope they can, er, 'manage' it. Lotta folks getting foreclosed in the US. OZ market is more disciplined and not so cavalier as the yanks. Still somewhat exposed.

Whether currently high prices are a normal part of the boom-bust property cycle or the plunge protection teams keep inflating away is anyone's guess.

Property prices, rents, living costs are symptomatic of consumer largesse. Negatively geared landlords and taxpayers are subsidising renters, as the cost of carrying a property is often twice the cost of renting it. And it takes 10-15 yrs to get on top it. Cant service debt and expenses with capital growth. You need other income. Majority of rental property owners have only 1 investment property. They are predominately middle income earners investing with fairly modest retirement objectives. The 'haves' and 'have-nots' are usually a tiny minority at the extremes.

How to fix it, l dont know, however... when finding oneself in a hole, the first thing to do is to stop digging. The ones who shouldnt be borrowing in the first place would be best placed to not start digging.

gimme, gimme, gimme... NOW.
bigger, better, more... NOW.
waaaaah.

Unless you are already several years into a mortgage or already have a secure job under the Award system, it's probably too late for you to get what the previous generation had.

The media are always telling us to "buy now or you'll miss out" and giving plenty of examples of how to make big money out of Real Estate. Even foreclosure auctions are being touted as "great opportunities" to get into the market.

Part of the problem is that nobody is building affordable houses at the lower end of the market. No more cheap entry-level hardiplank estates are being created for young families. They are now brick with double garages, carpet and all the mod cons.

I see the massive mortgages young people need to take out to achieve their dreams and it makes me shudder. There is no way my children, two of whom are young adults, could even consider buying their own homes for quite some time – even though they have reasonable jobs and live at home rent free so they can save as much as possible. At their age I owned my first home with a very small mortgage and tiny repayments – and that wasn’t all that long ago.

It seems to me that what’s really lacking is the political will to do anything about this problem which has been steadily getting worse for years. With the notable exception of people like Senator Andrew Bartlett who seems to have been a lone voice calling for national action on this for years, it’s something that’s only mentioned at election time by the major parties and then the promises of action are so vague as to be meaningless.

Young people being able to buy their first home should be at the top of the priority list closely followed by affordable public housing both to rent and to purchase.

Strikes me, the government likes high house prices because it drives the economy, especially with that great stamp duty revenue.

I think contributing factors:
1. Two income households can make bigger loan repayment = higher house price

2. Significant parental asset infusion (i.e. parents lend kids deposit) = young people can afford to enter unaffordable house market

3. Investors get tax benefit from home ownership = more people with more money own more houses (but can only live in one at a time). And believe me, they know every trick in the book to avoid Capital Gains Tax.

Houses are for living in, are they not? They seem to have become investment opportunities instead.

It's all about the means and the end. Money is the means, living is the end. Houses are not a means to make money. Money is a means to having a house to LIVE in. Lets get the focus right and start from there.

Of course, no government is going to be willing to remove houses from their entrenched role in the economy growth.

But when ordinary people can no longer afford a place to live we have to ask, what is our society all about?

M.Whitehouse, you miss the point about investors. You can make points about living in homes not making money from them, all you want. But the issue is that we have a shortage of houses available for rent, so we need to be encouraging investors to enter the market, not discouraging it. Rents ARE generally significantly less than mortgage repayments on the same type of home, so generally renters should still be able to save (there are some odd exceptions to the rule that exist but they are rare - I was lucky enough to get into the market on the back of one of them). And investors cannot avoid CGT if they sell. If they dont declare it in their tax return they are committing fraud, and are liable to pay up to double the tax in penalties and jail terms are even on the cards. The ATO has a data-matching arrangement with the State Lands Departments and has started to issue audit notices to people it can see have sold land but havent declared in their returns.

We can't go on trashing our natural environment with 'urban sprawl' indefinitely when we don't have enough water for our existing population and native fauna such as koalas and sugar gliders are being driven to extinction in South East Queensland. Urban sprawl driven by overpopulation is what caused the collapse of past civilisations, including the ancient Mayans and the Chaco Anasazi of pre-Columbian North America (see http://candobetter.org/about#chaco).

The time to stop growing the population growth which imperils our environment and drives up the cost of housing is now.

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Country Gal, I strenuously disagree that we should be doing anything to attract new investors to the industry.

Having housing considered an investment opportunity instead of a basic human need is what got us into the mess we are in in the first place.

The Housing Trust of South Australia provided good quality affordable housing to all sectors of South Australian society for decades and never cost taxpayers a cent. Money which would otherwise have been unproductively invested in property speculation was, instead, invested in South Australia's manufacturing sector. This experience shows conclusively that, if governments have the political will, they could easily find ways to house the whole community at far less cost than the cost we now bear, and we would no longer be obliged to support the profligate lifestyles of vast armies of real estate agents, land speculators, landlords, housing financiers, mortgage brokers, etc, etc.