Affordability talkfest a waste of time and money

Posted on 3/04/2014  
Affordability talkfest a waste of time and money

Got a bee in your bonnet about an issue and want some national attention? Go harass the Federal Government and they’ll create an inquiry.

It’s not hard to achieve. The ruling junta will believe almost anything, particularly if there’s been a bit of media hysteria to put the issue front and centre.

Certainly the property industry is having no trouble getting federal politicians to waste time and taxpayers money on talkfests about some of their pet topics.

Last week there was a housing affordability roundtable. According to the “communiquй” issued from Parliament House in Canberra, this was prompted by the belief first-home buyers can’t afford to get into the market. It also stated that “a major driver of increasing house prices and declining affordability is the under-supply of housing”.

In other words, a major talkfest involving government and industry leaders was based on real estate’s biggest furphies.

These are (a) that the only explanation for the low levels of first-home buyers is a lack of affordability, (b) that affordability is declining, and (c) that there’s a housing shortage and that’s been forcing up prices.

All are red herrings which have been dragged around by some of the industry’s representative bodies for the past several years. (The true reason for lower first-home buyer numbers is a major demographic shift, that everyone seems to be missing).

The prime mover behind this monumental waste of time was the Real Estate Institute of Australia, which is determined to oust the Housing Industry Association as the voice of insanity in the residential property industry.

The REIA has a serious obsession with first-home buyer numbers. The reasons for that are obscure, given that major markets around the nation are rising and the institute’s members are having their best time of it in several years.

The institute hasn’t bothered to do any research into why first-home buyer numbers are lower than normal. It has simply assumed that the only explanation is that they can’t afford to buy. This is surprising because the REIA is joint-publisher of a quarterly index that shows affordability has improved markedly over the past five years and is currently as good as it’s been any time in the past decade.

Why do they bother producing the report if they’re going to ignore its findings? Especially as the findings (that affordability is particularly strong at the moment) is supported by a host of other research reports, including those by the Housing Industry Association, the Australian Bureau of Statistics, Canstar and CommSec.

Apparently federal politicians don’t read because, despite the weight of evidence that we don’t have an affordability problem, they’ve accepted the industry line that young buyers “are finding it increasingly difficult to enter the housing market”.

They’ve also swallowed real estate’s biggest lie – that we have a serious housing shortage.

Given that price growth over the past decade has been lower than wages growth and not much bigger than inflation, and that there has been negligible rental growth in most of our major cities in the past couple of years, it’s clear we do not have the much-touted housing shortage.

Indeed, the most serious current issue is over-supply in some of our major markets.

Unless the forces of supply and demand no longer apply to real estate, how can the REIA and other industry bodies explain the lack of price and rental growth (keeping in mind that only Sydney had major growth last year, its first growth year in a decade) when they’ve been claiming a “chronic housing shortage crisis” for the past five years or so?

It’s a stunt to talk politicians into making decisions favourable to the industry, such as reduced taxes, faster approvals and favourable development policies.

The housing affordability roundtable follows the recent announcement that elements in the industry have managed to talk federal politicians into an inquiry to examine how foreign investors (read Chinese) are forcing up Australian property prices and dooming a whole generation of young Australians to a lifetime of renting.

If the inquiry is genuine, it will discover that the impact of foreign investors on the mainstream market populated by Aussie home-buyers is zero and that they’ve wasted a lot of time and money.

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