The great Australian
struggle,---www.theage.com.au/news/business/the-great-australian-struggle/2007/03/08/1173166895673.html
Ben Schneiders and Nassim Khadem
March 9, 2007
HOUSING affordability in Victoria is at its worst level since Paul
Keating was treasurer and interest rates were pushing 17 per cent,
a report shows, raising political pressure on the Government to act
on the issue in an election year.
Rising interest rates and higher house prices are pushing home
ownership out of the reach of many people, but neither the
Opposition nor the Government have released detailed policies on
the issue.
Three rate rises last year took the benchmark level to 6.25 per
cent while the median price in Melbourne hit a record high in the
December quarter of $391,000. A typical Victorian household now
commits 34.3 per cent of its gross income to service a new
mortgage, according to the Real Estate Institute of Australia
report. This compares with 30.6 per cent in late 2005.
The only time affordability was worse in the survey, which was
started in 1988, was the 1989 December quarter, when repayments in
Victoria peaked at 35.2 per cent of income.
A spokeswoman for Treasurer Peter Costello defended the
Government's record and said its first-home buyers scheme had
helped nearly 950,000 Australians buy a home.
"The real impediments to housing affordability are rising stamp
duties and a lack of land release," the spokeswoman said. "Stamp
duty collected by states and territories on home purchases has more
than doubled since 2000 to nearly $11 billion."
Labor Treasury spokesman Wayne Swan said housing affordability was
a complex issue, but affordability had worsened under higher
interest rates. Based on borrowing 90 per cent of the purchase
price of the median-priced Melbourne home of $391,000, repayments
had skyrocketed.
"Eight consecutive rate rises under the Howard Government have
added more than $130,000 to mortgage repayments on the average new
home loan in Melbourne over the life of the loan," Mr Swan
said.
ANZ chief economist Saul Eslake, who spoke at a housing conference
in Melbourne yesterday, said the way to deal with affordability was
to increase stock rather than put more money into buyers'
hands.
He said government actions such as increasing first-home buyers'
grants, stamp duty concessions or rent assistance would inevitably
result in dearer houses. "Policies which work only on the demand
side of the housing market are doomed to fail," he said.
"Instead, policy needs to focus on increasing the supply of housing
particularly low-cost housing and reducing the time taken to
bring land and housing to market."
Mr Eslake said that despite the housing boom ending in most cities
about three years ago, property prices had shown "remarkable
resilience".
The lower interest rate environment, greater competition in
mortgage markets and rising real incomes had fuelled borrowing and
contributed to the price increases.
Although the borrowing capacity of buyers had more than trebled in
the past 15 years, and immigration risen, there had been no
corresponding increase in the supply of housing.
A prominent property developer told the conference yesterday that
affordability would be improved by more medium-density development
in existing suburbs, not by developing the outer suburbs or through
high-rise apartments.
"Anybody that thinks that either urban fringe or high-rise
apartments are the answer to housing affordability, is totally
deluded," said Australand managing director Brendan Crotty. "Land
prices will kill one and construction costs will kill the
other."
Aussie average $1171per week income and 35.2%.
