Any measures in the federal budget aimed at housing affordability will have little impact on getting more people owning their own homes, according to latest budget monitor report from Deloitte Access Economics.
The concept of home and all that it means will come into focus at the federal budget next week with treasurer Scott Morrison indicating he will take action to increase home ownership.
The key questions are why housing has become so expensive and what can be done to get young people back into the market, especially in Sydney and Melbourne where prices have skyrocketed.
Nationally, house prices have risen 12.9% over the last year, with hot spot Sydney jumping almost 20%, according to the latest numbers.
Deloitte Access Economics blames record low interest rates.
“Affordability is through the floor because interest rates are through the floor,” according to the budget monitor report, led by respected budget forecaster Chris Richardson.
Deloitte Access Economics says politicians are increasingly pretending “they” can do something about it.
“Housing affordability is stunningly important … today’s housing prices are dangerously dumb, especially so in Sydney,” says Deloitte Access Economics.
Among the measures the federal government could announce in the 2017 budget are cutting the capital gains tax discount and supporting capital raising for social housing.
“But the likely impact of any of these on affordability would require a microscope to observe,” says Deloitte.
“Yes, there’s good policy there and much that we’d support,” says Deloitte.
“But affordability is rotten because interest rates have never been lower.”
Deloitte says each percentage point increase in interest rates would strip some 7% off average housing prices.
Here’s how mortgage rates have fallen over the last three decades:
“If politicians, state and federal, are leaving punters with the impression that they can solve housing affordability, then they’re leading us down the garden path,” says the budget monitor report.
“And that’s unfortunate, because the electorate is already incredibly disappointed in the ability of politicians to deliver anything.”
Shane Oliver, head of investment strategy and chief economist at AMP Capital, notes that the government is now playing down what it can deliver on housing affordability.
“Maybe a few fiddles to encourage downsizing but since the big issue is supply and that is a state issue there is not really much it can do,” he says.
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