‘Ridiculous prices’: Australians’ home ownership dreams turn sour | Goods

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Gary Jackson, a freelance photographer in Melbourne, Australia’s second largest city, started buying his first home in 2017.

But after five years of research, the 40-year-old bachelor gave up. Over the past 12 months, property prices in Melbourne have jumped nearly 20%, bringing the median property price in the city to more than 1.1 million Australian dollars ($832,000).

“When I started looking five years ago, the prices were already too high,” Jackson told Al Jazeera. “Every auction I’ve been to, the house has sold for six figures more than the advertised price guide. Then COVID happened, my business disappeared overnight and I’ve been living on the benefits ever since. government aid.”

Experiences like Jackson’s are common across Australia, where the average house price has almost tripled over the past 20 years. Over the same period, wages have increased by less than 82%, according to financial services firm CoreLogic.

Australia’s largest city, Sydney, is now second only to Hong Kong as the world’s least affordable city to buy a home, according to Demographia’s latest international housing affordability survey – and it’s not isn’t even the fastest growing market in the country.

That accolade goes to the chic seaside town of Byron Bay 750km to the north, where property prices have risen 212% over the past 20 years.

Australia’s median house price is now over AU$1.1m [File: [file: Ian Waldie/Bloomberg] (Bloomberg)

In January, the median price of a house across the country passed the psychologically important threshold of A$1 million ($757,000) – although creating a major talking point for the upcoming federal election, which is expected to take place in May.

“Yes [this] doesn’t put housing affordability on the government’s agenda, I don’t know what will,” Nicola Powell, head of research and economics at Domain Group, said in a recent statement. hurry.

A complex web of factors has contributed to Australia’s housing affordability problem, including historically low interest rates, easy credit due to financial deregulation, and a mismatch between housing supply and rapid population growth, which has seen Australia’s population swell by a third in the past two years. decades.

Critics have also pointed to government policy encouraging middle-aged and older Australians to store their wealth in investment properties.

These incentives include tax rules that encourage so-called negative leverage by allowing property investors to offset losses – such as when mortgage repayments exceed rental income – against their income.

“The negative gearing has not only pushed young people out of the housing market by driving up house prices, but the tax breaks are also going massively to those over 40,” wrote Matt Grudnoff, senior economist, in a blog for the Australia Institute. , a think tank in the capital, Canberra.

“Around 70% of benefits go to people over the age of 40, while only 30% go to people aged 40 or younger. This represents a double whammy for young people. They do not benefit from the negative tax relief and they are excluded from the housing market. »

Political appetite for change

However, neither the centre-right Liberal-National coalition government nor the opposition Labor party seem to want to change the system.

“Think about it. There are around half a million young Australians trying to get on the property ladder, but many millions are already sitting there and enjoying big gains,” said Martin North, director of Digital Finance Analytics in Wollongong, 85km south of Sydney, at Al Jazeera.

“We have found ourselves stuck in a no-win situation, and the only thing governments can do is do the same by giving first-time homebuyers incentives that allow them to borrow more.”

North, whose city saw median home prices soar 30.4% last year, said tinkering with financial incentives won’t solve a three-decade problem.

“Some would say the Australian economy is now a real estate economy with a bit of ordinary economic activity alongside it,” he said. “So from an electoral point of view, politicians are always going to look to real estate investors. They will make noise about housing affordability, but I don’t think there is much chance of change.

Prime Minister Scott Morrison last week played down the issue of housing affordability, saying it has always been difficult to get on the property ladder in Australia.

“The hardest thing to do when you’re buying your first home – I remember this when Jenny and I were buying our first time it was, it was hard back then, I think it’s harder now – was the deposit that you have to withdraw together, and it was a 20% down payment,” he told local television.

Morrison also pointed to the recent expansion of a home loan guarantee program that allows first-time buyers to borrow up to 95% of a property’s value without having to take out mortgage insurance, which normally adds 0. .5 to 1.5% additional to borrowing costs. .

Australian Prime Minister Scott Morrison
Australian Prime Minister Scott Morrison faces re-election in May [File: Lukas Coch/AAP via Reuters]

The expansion of the scheme, however, is only expected to help around 25,000 people who are already on the verge of home ownership, while the opposition has accused Morrison of trying to buy votes ahead of the election.

Some figures argue that the problem requires a broader view than that displayed by the cautious Canberra political class.

“In the past, we had leaders in Australia with a vision who built cities in the middle of nowhere like Canberra,” Daniel Lewkovitz, a first-time candidate for the minor Liberal Democrats, told Al Jazeera. promotes economic liberalism. “But most politicians today only see the next election instead of what this nation needs to thrive for the next 100 years.”

Lewkovitz said Australia should learn from countries like Israel, which built the city of Beersheba in the middle of the Negev desert, and make more use of its vast tracts of uninhabited land.

“Despite Australia’s huge landmass, our population is highly concentrated in very small areas and people who would wish to live outside of these areas have very limited access to infrastructure and services,” he said. declared.

“No government in recent times has introduced big ideas such as greening the desert with new cities.”

Meanwhile, for disillusioned Australians like Jackson, home ownership remains a fantasy at best.

“Now there’s not even a reason to look at houses anymore,” Jackson said. “Banks won’t lend me money because my income is too irregular and even if they did the prices are now ridiculous,” he said.

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