Research has found that more than half Australians report that they sacrifice social life and family time to pay off their home loan debt. The Home Ownership Inquiry was established by then- Treasurer Joe Hockey to assess issues related to home ownership in Australia (aka housing affordability) and to work out whether the government should introduce any new policies to help make it easier for Australians to get a foot on the property ladder and avoid mortgage stress. The terms of reference for the inquiry were to investigate:
- Current rates of home ownership;
- Demand and supply drivers in the housing market;
- The proportion of investment housing relative to owner-occupied housing;
- The impact of current tax policy at all levels; and
- Opportunities for reform.
After 20 months and eighty-six submissions, the Committee has decided that things are fine as they are.
The Committee opted to take a whole-of-country approach when deciding whether affordability was an issue, noting that while demand for housing is strong in Sydney and Melbourne, there are other parts of Australia with a relatively weak housing market meaning that taken overall, there is no housing crises.
That may, of course, be cold comfort for the significant number of people working and trying to live affordably in Sydney or Melbourne.
— John Daley (@JohnDaley_) December 16, 2016
“The committee’s view is that government policy in this area should predominantly focus on boosting dwelling supply in underserved markets,” states the report.
“Many of the witnesses before the inquiry stated that a lack of supply was contributing to rising house prices in Sydney and Melbourne. In the committee’s view, state and territory governments need to do more to adequately address land supply and ensure that existing policies and processes are not unnecessarily causing an undersupply.”
Some of the mooted reforms, and the Committee’s response, were as follows.
|Reform negative gearing||The committee supports the maintenance of existing negative gearing arrangements, which have been a feature of the Australian tax system for most of the last century.|
|Reform capital gains tax deductions||The committee does not support increases to capital gains tax rates on the sale of housing.|
|Reform current property investor laws||In relation to possible overheating of the housing market by increased investor activity, the committee notes that APRA has the capacity to further limit the growth of borrowing by investors, should it deem this to be in the interest of financial stability.|
|Reform land tax||Changes to current land taxes, such as the introduction of a broad-based system, would be a major change to Australia’s existing taxation arrangements. Any proposal by state governments to make such a change should only be considered in the context of an overall review of property taxation.|
Research has found that one-third of first home buyers are worried about their level of debt. But does the inquiry result mean that any lack of housing affordability is all in our mind – perhaps the result of too much smashed avocado? There is some danger in a whole-of-country approach, particularly one that doesn’t assess various demographics separately. Home ownership ratios among younger generations will be interesting to watch over the next few years.