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Another idiotic housing affordability “solution” emerges - Article by Leith van Onselen

Leading real estate rent-seeker, the Property Council of Australia (PCA), is pushing for another idiotic policy “solution” to fix Australia’s housing affordability woes: offering a government-backed low deposit home loan scheme.

From The Australian:

"A government-backed low-­deposit home loan scheme could help address housing affordability by getting more buyers into the market and adding to the housing stock, according to the Property Council of Australia…

The PCA highlighted the Keystart program in Western Australia, where buyers can purchase a home with a 2 per cent deposit in Perth and up to 7 per cent in regional areas without paying lender’s mortgage insurance…

PCA chief of policy Glenn Byres said the program had been “useful in helping to drive supply” and had helped buyers who would otherwise be locked out.

“The big challenge right now is the deposit gap and people having to save sufficiently to meet the deposit requirements of ­lenders,” Mr Byres told The Australian…

BIS Oxford Economics senior manager for residential property Angie Zigomanis said any rollout of such a scheme might encourage some borrowers to buy better properties than they could otherwise afford, which could drive up prices for more affordable homes…

Digital Finance Analytics principal Martin North… echoed concerns about pressure on pricing, saying that when similar programs had been introduced around the world “it tends to lift property prices higher”.

Earth to PCA: you don’t “fix” housing affordability by sucking sub-prime buyers into the market and raising demand. You fix it by implementing policies that lower demand and boost supply. You know, things like:

  • Normalising Australia’s immigration program by returning the permanent intake back to the level that existed before John Howard ramped-up it up in the early-2000s – i.e. below 100,000 from over 200,000 currently [reduces demand];
  • Undertaking tax reforms like unwinding negative gearing and the CGT discount [reduces speculative demand];
  • Tightening rules and enforcement on foreign ownership [reduces foreign demand];
  • Extending anti-money laundering rules to real estate gatekeepers [reduces foreign demand]; and
  • Providing the states with incentive payments to:
    • undertake land-use and planning reforms, as well as provide housing-related infrastructure [boosts supply];
    • swap stamp duties for land taxes [boosts effective supply]; and
    • reform rental tenancy laws to give greater security of tenure [reduces demand for home ownership and reduces rental turnover].

    As usual, the PCA is using the fig leaf of “housing affordability” to lobby for government subsidies to the housing sector. This shameless self-interest should be resisted on all fronts.

    Article first published by Unconventional Economist in Australian Property at 8:33 am on January 12, 2018 by Leith van Onselen at