Q&A: Australian dream of home ownership ‘might be’ over

Experts have admitted the Australian dream ‘might be’ over for aspiring homeowners, as the housing crisis deepens.

The Australian dream of owning a home with a backyard “might be” over for aspiring homeowners as experts reveal the grim reality facing young Australians.

Finance journalist Alan Kohler was a panellist on Q&A on Monday night, discussing the housing crisis with Minister for Housing and Homelessness Clare O’Neil, shadow minister Michael Sukkar and Gratton Institute chief executive officer Dr Aruna Sathanapally.

A young man named Samuel asked if the “Australian dream of owning a house with a backyard in a city (is) over for all of my generation?”, with Mr Kohler simply replying: “It might be”.

“The backyard has become really expensive, particularly close to the city,” Mr Kohler said.

“I think we’re in the situation now where if you want a backyard, you’re going to have to move a fair way away from the city.”

Finance journalist Alan Kohler said the dream of inner-city houses with backyards ‘might be’ over. Picture: ABC

Ms O’Neil noted Mr Kohler made a “good point”, but emphasised the government is “trying to do everything (they) can” for young people.

“Maybe if you want more space, you’re going to have to move further away from the city, but what we really need is lots of options for young people like yourself,” Ms O’Neil said.

“And right now you don’t have enough, our government is trying to do everything we can to create more.”

Mr Sukkar said the Coalition doesn’t see the “backyard as being dead”, but agreed people may need to move further out for the “traditional 800 square metre block”.

“If you look at Australia’s housing market right now, the cheapest form of housing is detached housing,” Mr Sukkar said.

“It’s the province of first home buyers because the construction costs aren’t what they are elsewhere.

“So I would say we at the Coalition, no one would see the backyard as being dead, but the truth is it may not be in those absolutely inner-city suburbs as it’s been in the past.”

However Dr Sathanapally said her dream is a “great inner-city place with a fantastic park where my kids can play with other kids in the neighbourhood”.

“I think for many people that is also a dream, I think that’s fine,” Dr Sathanapally said.

“FAILURE TO BUILD ENOUGH HOUSES”

A housing expert has revealed the true failure of Australia’s housing problem and has said if the government would reduce migration to solve the crisis, the economy would suffer $200b over three decades.

In a response to whether migrants were to blame for the housing crisis, Dor Sathanapally said the source of the problem was the lack of housing.

“So we can do it and cut migration but we shouldn’t pretend that isn’t a costly way to go about solving a housing problem when the source of the problem is our failure to build enough houses for the population we always knew we were going to have by this point,” she said.

Dr Sathanapally said businesses would say reducing migration was costly because they would not be able to get the workers they need, and universities would be hit by one of the nation’s most successful export industries.

Dr Aruna Sathanapally said reducing migration to solve Australia’s housing crisis would cost the economy $200b over three decades. Picture: ABC

“The care sector will tell you it’s costly because it affects our aged care workforce and childcare workforce,” she said.

“If we don’t get our housing system right and we can’t accommodate the workforce that we need, the working age population we need, that creates all sorts of problems elsewhere.

“So even a reduction as such as what the Coalition has proposed of 25,000 in terms of our skilled migration, we’ve calculated that would cost us more than $200 billion over 30 years and that’s because migrants pay more in tax than they take in services.”

“BANK OF MUM AND DAD”

In the first question of the night the panel was asked about whether Reserve Bank governor Michele Bullock was out of touch by revealing the bleak reality of households struggling, saying some may “make the difficult decision to sell their homes”.

In a speech to the Anika Foundation fundraising lunch in Sydney on Thursday, Ms Bullock said the board was “very conscious” of how interest rates, currently at 13-year-high of 4.35 per cent, were affecting households and business.

She said about 5 per cent of borrowers were struggling with a “cash flow shortfall,” where essential spending and mortgage repayments were in excess of their income, with Ms Bullock admitting this group would need to make “quite painful adjustments”.

“This includes things like cutting back on their spending to the more essential items, trading down to lower quality goods and services, dipping into their savings or working extra hours.

“Some may ultimately make the difficult decision to sell their homes,” she said.

On the show on Monday night, the man who asked the question said he was living at home and had a “good job” but would find it impossible to be in a position to buy a home without some help from his parents.

Minister for Housing Clare O’Neil said the bank of mum and dad had become a normalised experience for Australians buying a home. Picture: ABC

In response, Housing Minister Clare O’Neil told the audience she believed supply was the answer to the issue.

She conceded it was a “difficult environment” in Australia at the moment and it was important for the government to “balance things”.

“Your story is a really common one and you sort of mention a fleeting reference to the bank of mum and dad. I’m sure you call them that, don’t you?” she responded.

She said the “bank of mum and dad” had become a normalised part of the experience of buying a home for many Australians.

“The thing that scares me most is when I look at how the housing prospects for young people in our country have changed since the 1980s,” Ms O’Neil said.

“If you look at a low income young person in 1980, at the time, 60% of young people owned their own home. Today that figure is about 20%. This tells us that the life experience of being a low income person in our country today has radically shifted over a 40-year period just because of housing.”

She said in the post-war period the Commonwealth has “walked back” and said the previous Coalition government had “tapped out of housing”.

“We take a very different approach and we’re reaching right into this problem,” the minister said.

HOUSING OVERTAXED ASSET CLASSES IN AUSTRALIA
Ms O’Neil engaged in a heated debate with Mr Sukkar around whether building more homes would create more affordable housing.

Mr Sukkar argued that housing in Australia was one of the most overtaxed asset classes.

He said Grattan Institute research showed about 50 per cent of the cost for first homebuyers in Sydney was taxes and regulatory charges.

“So it’s very galling on one hand when you have any politician saying we want more affordable housing, yet they’re taxing housing to death,” he said.

“So you abolish negative gearing for housing. Let’s remember no-one is talking about abolishing negative gearing for people speculating on the share market or other assets.”

Shadow minister for housing and homelessness Michael Sukkar said about 50 per cent of costs for first homebuyers in Sydney were taxes and regulatory charges. Picture: ABC

Mr Sukkar said about 30 per cent of Australians rented.

“So that means a third of every home needs to be owned by a landlord,” he said.

“There’s a movement that’s been adopted by the Albanese government to basically bring in corporate landlords. So foreign funds, and our superannuation funds to own the housing stock in this country.”

Mr Sukkar said the Coalition did not want housing stock owned by foreign corporates and would prefer it was owned by Australians.

He also said they did not want a US-style corporate housing market.

“That’s what’s happening with the government who have brought in tax changes which provide the cheapest, the best tax arrangements for any investor in this country now is a foreign US or a foreign fund to purchase property in Australia,” he said.

Ms O’Neil said negative gearing was not something the Labor Party were looking at after it lost the election to Scott Morrison.

“We’re focusing on building more homes for Australians and that’s the one thing I can be abundantly certain is going to create more affordable housing for all Australians,” she said.

She spoke of the “build to rent” model where institutional investors would develop a building and run the tenancy.

The minister said institutional investment was being blocked because of a decision Scott Morrison made around raising taxes on property investment.

Q & A panellists Dr Aruna Sathanapally, Michael Sukkar, Clare O'Neil and Alan Kohler discussed the nation’s housing crisis. Picture: ABC

“Now if we probably have got property developers in this room and they’ll tell you we need more finance to help us build more homes,” she said.

“Labor has a bill to resolve this problem sitting in the Senate at the moment and Michael and his friends in the Australian Greens are stopping us from moving ahead with it.”

The minister said the government had made the biggest investment in social and affordable housing in a decade.

“We are doing this, there are $10 billion fund that will provide half a billion dollars a year and support 30,000 social and affordable homes.

“This is a policy that was delayed for six months because the Liberals and the would not let us get it through — Greens would not let us get it through the government.

“For all the tears being shed for housing in this almost everything our country is doing is trying to be blocked by the Liberal and the Greens and I want them to get out of the way.”

DEBATE OVER SUPER

The panellists were asked if people used part of their superannuation to help buy their first home whether it relied on house prices continuing to outpace inflation.

Shadow minister Mr Sukkar said polling showed that 61 per cent of people supported using their superannuation for a home deposit.

He said in Sydney at the moment it took the average first homebuyer more than 10 years to save for a deposit.

“We have announced people can access up to $50,000 of their super with one condition and that is when you sell the home and on average Australians hold their first home for seven years, when you sell that home you recontribute it back into super,” he said.

But financial journalist Mr Kohler said it relied on house prices to keep rising more than super.

Q & A panellist Finance journalist Alan Kohler said using super for a house deposit relied on the house prices to rise more than super which would be terrible. Picture: ABC

“If the idea is you take $50,000 out of your super and put it into a house and whatever the time it is you put it back into super, if house prices haven’t kept up with super, then you’re going backwards,” he said.

“We don’t want house prices to keep rising at the same rate as super. Super is going up at 9 per cent a year. That would be

terrible.”

Dr Sathanapally argued the purpose of using your super for a house deposit meant you could own your own home.

She said if you went into retirement owning your home, that was predictive of less financial stress and less risk of

poverty later in life.

She said unfortunately, the people who have super to use for their houses are not low income people.

“So this policy isn’t actually going to help people who are likely to go into retirement not owning their home and are at risk of poverty,” she said.

“What it will do unfortunately, like all demand-side measures and first homeowner grants and exemptions, is that it increases prices.

“Maybe not hugely but it increases prices and it won’t help the situation unless you do the thing that Clare has talked about which is you’ll have to build more houses.

“You go back to the idea there’s nothing that will solve this problem that is not building houses.

“There are other things you can do, you can fix negative and good tax reasons to do that.

“You can tinker around the edges because what you need is more houses and you need greater density and those houses to be in established suburbs where people want to live.”