Australia's housing crisis needs a deeper fix
PERHAPS, no other movie depicts the Australian dream of owning a home more than the 1997 classic comedy The Castle, in which the Kerrigan family takes on developers to save their house.
Fast-forward 28 years and nobody is laughing.
For the first time, Millennial and Gen Z voters will outnumber those aged over 60 at polling stations on Saturday.
Housing is a – if not the – top concern in this federal election.
Most are resigned to never being able to get into one of the world's most unaffordable markets.
Policies put forward by the two major parties are unlikely to make things better.
If re-elected, the ruling Labor Party promises to allow all first-time buyers to purchase a home with as little as a 5% deposit.
It is committed to building 1.2 million homes by 2029 but, at the current rate, could fall short by as many as 400,000 dwellings.
The opposition Liberal-National coalition wants to allow first-time buyers to deduct some mortgage interest payments from their taxes and tap pensions for initial deposits.
Economists believe that both policies will drive prices higher because they are skewed toward demand.
That is why more ambitious reforms need to be part of the discussion to add to supply and improve affordability.
Revamping a tax system largely seen as favouring speculators and investing in regional centres to ease the strain on the major cities should be among policies on the table.
This is now even more crucial.
Labor shortages, increasing costs, complex approval processes, and land availability around transport hubs and essential services mean Australia can't build homes fast enough to satisfy demand amid record numbers of migrants.
Rents are also soaring.
To demonstrate a genuine commitment to reform, making longer-term rentals viable now that people are being priced out of ownership should be considered as part of any housing policy.
Renting has been seen as a transitional stop to owning.
Australia could explore arrangements similar to what is available in Scandinavian countries, which have also experienced rapid population growth and increased demand for homes, Abul Rizvi, a former deputy secretary of the Department of Immigration, told the Bloomberg Australia Podcast.
Long-term rental is a more natural approach for most of Europe.
'In Australia, owning your home is the big deal,' Rizvi said.
Australia is not alone in dealing with a housing crisis.
But owning a house (or more) is so embedded in the national psyche that it's even been called pathological. It has stood as a symbol of stability for a young, migrant country.
My first memory of Australia as my family drove out of Adelaide airport in 1982 is of stand-alone houses. I was mesmerised.
I had grown up in a Soviet-era apartment block in Bucharest; as an adult I lived in high-rise apartments in Hong Kong before finally returning to Sydney and purchasing that quarter-acre block.
One of the most contentious debates is about what is known as negative gearing, a popular way for property investors who borrow to reduce their taxable income.
While some argue that it has added stock to the rental market, it's also seen as driving up prices by fuelling demand for investment properties, pricing out first-time buyers.
The Melbourne-based think tank Grattan Institute said this kind of financial leverage goes 'beyond the broadly accepted principle of offsetting investment losses against investment gains'.
More than 65% of household wealth – which stood at A$17 trillion in the December quarter – is tied to property due to the rising value of land and homes, according to the Australian Bureau of Statistics.
And politicians have skin in the game, including the prime minister and the leader of the opposition.
More than half of members of parliament are property investors. It's no surprise that nobody wants to see values decline.
Negative gearing is such a hot topic that any suggestions it should be tweaked generate frenzied debate.
It has been a poisoned chalice, costing elections.
The question is, are Australians ready to accept that to tackle affordability from every possible angle, a generous perk in its current form has had its day?
As more people will likely live in apartments, minimum quality standards need to be enforced.
Examples of poorly built homes abound.
Better, smarter and more functional units should be built for those who may never be able to afford stand-alone homes, families and downsizers.
Australian house prices have been defying gravity as long as I can remember, despite predictions of a crash.
Sydney's median house price is at a record A$1.19mil (US$760,000), and the average home costs almost 14 times the annual disposable income.
This has made it the world's second-most expensive city to buy property after Hong Kong. — Bloomberg
Andreea Papuc is a Bloomberg columnist. The views expressed here are the writer's own.
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