More than 70% of young people believe they’ll never be able to buy a home

Almost three-quarters of young Australians believe they will never be able to buy a home, as confidence in the housing market has flatlined over the past year despite house prices falling over the same period.

An exclusive survey shows that a growing majority of people believe that the Australian dream is unreachable for the young and that state and federal governments need to launch radical interventions in the housing market to make home ownership affordable again.

More Australians believe they have been priced out of ever owning a home.Credit: Fairfax Media

The findings will heighten debate about how to solve the housing affordability crisis after Australians were hit by the largest fall in real wages on record this month and interest rates soared to a 10-year high.

The new survey, conducted by Resolve Strategic for this masthead, shows 63 per cent of Australians now believe that the young will never be able to buy a home, compared to 57 per cent a year ago.

The results are more stark when young people answer for themselves, with 72 per cent of respondents between the ages of 18 and 34 saying they will never be able to buy a house.

This is despite prices for dwellings falling by 12.1 per cent in Sydney and 8.1 per cent in Melbourne last year, according to data firm CoreLogic.

Grattan Institute economic program policy director Brendan Coates said most people were less confident about purchasing their first home because their capacity to borrow money had fallen by more than the decline in house prices.

He said this was caused by the rise in the cash rate along with the government-regulated “serviceability buffer”. Banks have to assess people’s borrowing capacity at 3 per cent higher than the current borrowing rate.

“With the borrowing rate sitting at just over 5 per cent, they’re being assessed on whether they can pay the loan at 8 per cent,” Coates said, adding the problem was only going to get worse with people to be assessed at a borrowing rate of more than 9 per cent after additional rises this year.

Coates said the fact that people’s real incomes have fallen to where they were in 2010 was also affecting how much first home buyers could put towards a mortgage “because the costs of the essentials they need to buy has gone up faster than their income”.

The survey also showed a 3 per cent increase in the number of people who said they had been priced out of the market over the past year.

When asked why they were renting a house, 49 per cent of respondents said they had been priced out of the market, while just 17 per cent said they had chosen not to buy a house and 27 per cent said they were confident of buying in the next decade.

When asked to name policies to address the crisis, respondents in the poll favoured government intervention over tweaking tax concessions such as negative gearing and capital gains discounts.

Seventy per cent of respondents supported “rent to buy” schemes – where renters have the right to buy their accommodation at the end of their lease – while two-thirds of respondents supported investing government funds in building housing and planning regulations to force new housing developments to include a proportion of low-cost housing.

Coates said tinkering with negative gearing and capital gains tax discounts would have a “modest effect on house prices”.

He said he believed both the Commonwealth and states would come under pressure from voters to directly intervene in the market by developing their own affordable housing projects.

“It wouldn’t be surprise me if we see the Commonwealth, but particularly states governments, go down that path,” he said.

“Housing is a ticking time-bomb in the sense that it is going to create an enormous amount of political angst for governments in the year or two ahead.”

Housing Industry Association chief economist Tim Reardon said there had been a significant increase to the cost of lending to first homebuyers since the global financial crisis, and the 3 per cent buffer was discouraging banks from approving more mortgages.

“That is the reason why it is much harder to become a home owner now than it was when interest rates were at 18 per cent in the 1980s,” he said.

Reardon said changes to negative gearing or capital gains tax “will only make the situation worse – you can’t make houses cheaper by increasing the taxes on houses”.

Home-buying hopeful Kiandra McDonell, 28, said she and her friends felt the property market had become almost impossible to navigate. “I’ve had friends talk to me and be like, ‘Hey, do you want to go in together and buy a house?’”

First home buyer Kiandra McDonell thinks buying a property is “almost impossible”.Credit: Chris Hopkins

The South Yarra renter was rosy about her chances of buying a home herself, but conceded she was putting more effort than was typical. “I don’t know if I’m just overly optimistic, but I don’t know if I would say it’s 100 per cent unattainable … [I still think] I can do it,” McDonell said.

“I just have to work harder to do it and be a bit more strategic in my spending.”

The Albanese government wants to set up a $10 billion fund to invest in new housing projects, with the aim of building a million new homes over five years, but it is yet to acquire support from the Coalition or the Greens to see the legislation through the Senate. The Greens do not think the package goes far enough.

Reardon said the steps the government was taking were in the right direction, but the nation needed a million new homes a year to ensure the problem doesn’t get worse.

Federal Housing Minister Julie Collins said the housing fund would play a key part of the solution, adding it was the single biggest investment by the Commonwealth in social and affordable housing in more than a decade.

“We’ll continue to hold constructive conversations with all interested parties, to ensure this vital legislation passes the Senate as quickly as possible,” Collins said.

Opposition housing spokesman Michael Sukkar said the government should take up the Coalition’s policy to allow first home buyers to invest up to 40 per cent of their superannuation, up to a maximum of $50,000, to purchase their first home.

“It is disappointing that under this government home ownership is no longer a priority, with first home buyers at their lowest levels for over a decade,” he said.

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