In ANZ’s latest Blue Lens report, released on 14 June, chief economist Richard Yetsenga and economist Joanne Masters called for more action on housing affordability, claiming that government responses have not been equal to community concerns.
“One of the disappointments of the housing affordability debate in Australia is the split between how seriously people view the issue and how limited the policy response has been,” the report reads.
“Government policies that are narrow in scope and perceived to hurt no one seem to be favoured.”
ANZ’s economists added that, like policy responses in previous decades, recent initiatives implemented on the state and federal level “haven’t resulted in any sustained improvements for first home buyers (FHBs)”.
The authors of the report stated: “Historically, stamp duty discounts haven’t resulted in any sustained improvement for first home buyers’ access to the market.
“Policies introduced in late 2008 initially provided a clear boost, particularly in New South Wales, Victoria and Queensland. However, the impact was fleeting, with approvals initially soaring but then slipping below levels seen prior to the policy announcements with no net additional purchases evident.
“Similarly, when state governments announced the removal and reduction of these polices in 2012, buyers on the cusp of entering the market rushed to take advantage of the stamp duty relief.
“The current episode is following this pattern.”
The bank noted that while FHB finance has risen strongly in response to announced measures, particularly in NSW and Victoria, the momentum is “starting to wane”.
Further, the authors claimed that rather than “throwing money at the problem”, policy responses should seek to “shift the dial on housing supply”, noting that “housing stock is only rising by around 1–2 per cent per year, broadly equal to population growth and certainly not fast enough to address the under-investment of the past decade”.
However, the Blue Lens report adds that “even if presented with incentives to increase supply, capacity constraints are likely to limit the pace of construction”.
“As a result, making it easier for one group to buy simply bids up the price of dwellings in that segment and crowds someone else out.
“In the case of first home buyers, often it is the next wave of potential first home buyers that are crowded out.
“We’re already seeing this as a consequence of the latest policy steps, with prices at the lower end of the housing market, and notably apartments, rising more quickly than the broader market.”
The major bank noted that the “complex problem requires thoughtful solutions”, which it said would involve “meaningful tax reform”, beyond capital gains tax and negative gearing, as well as policies that would enhance financial literacy to avoid “inertia” in the saving behaviour of younger Australians.
It also called for a holistic policy approach to housing supply.
“Similarly, adding housing supply seems obvious. But even if you can overcome capacity constraints, adding supply without infrastructure and the amenities necessary to create communities is likely to result in gains which are fleeting and, if not managed carefully, will do little to benefit owner-occupiers,” the report reads.
ANZ has therefore urged governments to consider policy that would place emphasis on housing affordability rather than home ownership.
“The debate in Australia tends to focus on home ownership, rather than affordable housing, including a more developed and tenant-friendly rental market,” the economists said.
“In fact, one of the key differences between the Australian rental market and that in other countries is the frequency of long-term tenancy. Long-term tenancy that can evolve into an option to buy would, of course, be even more advantageous.”
Moreover, the major lender urged policymakers, who are “conspiring against simple solutions”, to consider broader socio-economic circumstances.
“Technology’s broadening impact to include the service sectors of the economy is favouring urbanisation. The knowledge economy requires collaboration; only proximity can bring those benefits.
“Let’s get all the issues on the table rather than constantly trying to narrow the debate to one or two cherries. Helping one segment of the market may seem like the right thing to do, but the reality is that it offers little more than a sugar hit.”
[Related: Government housing decision slammed]