Are we going to be okay?
Gosh, what a big question.
So over the last three videos, we\’ve taken some time to understand how we have arrived at the status quo in Australia, where it\’s extremely hard for first home buyers to crack into the housing market. As young Aussies, we know that owning a home is the Australian dream. Is it becoming a nightmare? No, we can\’t. End on that note.
We need to think about solutions. And yes, as we discussed earlier in the series, we know a change in some of the big policies such as negative gearing or move on interest rates can change the game. But let\’s take some time to think about solutions that are more out of the box to talk about how to renovate the housing system.
I sat down with Professor How Pawson Professor Pawson has spent his career studying Australia\’s housing market and how to change the game. So Professor Pawson, what does owning a house mean to us as Australians?
The problem really is that it\’s got two meanings how useful it is to you to live in. It\’s also an investment good as well.
At the end of the day, who is responsible for housing affordability?
No one takes responsibility for housing affordability in Australia.
We\’ve paid some attention to the recent federal inquiry into housing affordability and experts told that inquiry that if an extra 50,000 homes were built across the nation each year for a decade, prices and rents could be as much as 20% lower. Interestingly, in the first 20 years after World War Two, Australia\’s housing stock nearly doubled because of investment from the government that built an extra 100,000 homes.
For most of the last 50 years, both Liberal and Labor governments have told voters that building new homes will make buying affordable. But has that happened? Is that what we should be asking our governments to do?
During that time, government was building around about 16% of all housebuilding. Compare it to what we do today, which is about 1%. It does remind us that that is possible. It wasn\’t a communist government that was doing that. For a lot of that time it was. Menzies was the Prime Minister. What we need is, is institutional reform. So changes to this sort of structure, the governance of housing really, if you try to tackle housing problems incrementally around the edges one by one, and it\’s often ineffective, sometimes it\’s even counterproductive.
The top call is a commitment from the federal level to have a national housing strategy. Once you have that, a lot of other things flow from that.
So that\’s a really interesting point. Housing supply is already relatively strong. We\’ve built more homes in the last five years than at any other point in history, but prices are still going up. In the find a first home buyers report, over 1,001st home buyers were asked what they actually look for in a first home. Here\’s the results. One interesting solution that\’s come up in my research is the building of another urban center.
So picking a regional town and saying this is the next start up hub, this is the next corporate hub. What do you think about that idea?
One of the one of the limiting factors for housing affordability of housing supply is land that is developable. Australia is a huge continent. It has a massive amount of land, but the vast majority of that is located in places where people couldn\’t access services, jobs. The limiting factor isn\’t land, so the limiting factor is developable land. What influences developable land is infrastructure.
The urban center that you\’re talking about would require an infrastructure policy that was consistent with that. We don\’t really have that at the moment. Ideally, it would be part of a national housing strategy.
What do you think about strengthening rental regulations so that young people can feel more secure in their homes?
The Victorian Government has actually shown the way here because Victoria has made significant reforms to its rental regulation framework. Those reforms crucially provide more security for tenants. Landlords are no longer able to at will and the tenancy without any good reason for doing so. If renting is something that\’s not just a temporary thing and for a lot of people it definitely is.
And then things like that are important.
I think there\’s one thing we haven\’t addressed and that\’s mindset. The fear of missing out is real. We all think that if we don\’t jump into the property market right now, we\’re going to miss out entirely. And that\’s exactly what Graeme Cooke, the head of consumer research at finding a condo that you had to say.
Aussies who are looking to get on the housing ladder would have seen the two property dips. So when the prices dipped again at the beginning of lockdowns, the economy turned out to be pretty robust. The market bounced back. And then fear of missing out, kicked in. People saw the prices starting to increase and they thought, if I hold off any longer, prices are going to be too expensive by the time I finally get to buy.
That surges is dissipating somewhat. Prices are not increasing as dramatically as they were. So we\’re not going to see those 15 to 20% price increases next year in 2022. We\’ll probably will still see growth, probably about half of the growth we\’ve seen in 2021. And that\’s what our economists are saying anyway.
I think we probably at least need to modify the what the Australian dream or aspiration is suburban home ownership with a large backyard. That\’s something which is becoming out of reach.
Are we going to be okay?
I think you know, I think there\’s a vigorous debate about some of these issues now. There\’s more recognition among the economic community. That\’s the part of academia that\’s a part of the policymaking community that has the power, has the influence. And maybe that is going to work its way through to giving more priority to fixing some of those problems.
Okay. So where are we at? We\’ve talked a lot about the problems. We\’ve talked a little bit about the solutions. And I think what\’s jumping out at me is the biggest step that\’s happened at the moment is the fact that we\’re talking about it. It\’s the fact that policymakers, experts and especially young people have it as top of mind.
And if we zoom out, that\’s actually a really big deal. The fact that lawmakers, experts and most of all young people are actually having this discussion means that we\’re much closer to finding a solution. We might think. From here, I think the best thing for us all to do is to scrub up on our financial literacy, to understand the terms they used to describe the housing market.
If we do that, we can be more active players in the property market, more active in the economy, and be part of the conversation.