Record low interest rates, a lack of supply and a tax system that favours investment over owner/occupied, have all combined to drive price hikes in Australia.
Young Australians are being bullied out of the housing market, as city property prices continue to skyrocket.
Australia’s plight was outlined by Demographia earlier this year, when it placed Sydney ahead of London and New York as the second most expensive housing market in the world — only Hong Kong edges out the harbour city.
Record low interest rates, a lack of supply and a tax system that favours investment over owner/occupied, have all combined to drive price hikes in Australia. Even Melbourne, which has been named the world’s most liveable city for the past seven years by Economist Intelligent Unit, is the sixth most expensive city in which to purchase a home.
In January, Domain Group also reported that Sydney’s median house price had surged to a record $1,123,991 by the end of 2016, with Melbourne listed as the next steepest at $795,447.
The result, as Bloomberg highlights, is a record low in young home-buyers in Australia.
Just 45% of 25 to 34-year-olds own their own home, which Bloomberg says is down 16 percentage points from the 1980s, with almost half the decline coming in the past decade.
The tax advantage for investors, known as negative gearing, means that if the rent on the property is not covering the mortgage repayments (including interest), the investor can claim the costs as a tax deduction against other income. More than 2 million, or one-in-12, Australians own an investment property, with almost 30% of those owning two or more.
“The great Australian dream of home ownership is becoming a nightmare,” Brendan Coates, a housing policy expert at the Grattan Institute, told Bloomberg. “It’s down to a collective failure of government policy that will take at least two decades to fix.”
Judith Yates, who has advised the government on housing policy and is an honorary associate professor at the University of Sydney, added, “What politicians have offered so far are band-aid solutions that might be popular in the short-term but will be ineffective in the long-run… There hasn’t been a serious attempt to tackle the fundamental causes of declining affordability.”