Speaking to the House of Representatives’ standing committee on taxation and revenue for its ongoing inquiry into housing affordability and supply in Australia, the president of the Real Estate Institute of Australia (REIA) highlighted that urgent action was needed to address the rising inaffordability of property in the country.
President Adrian Kelly said: “It’s fair to say that the current housing affordability and supply challenge in Australia is without doubt the most significant on record that we’ve seen. In layman’s terms this means that, for the average homebuyer or renter, there are fewer properties to choose from, and all of those properties are being sold or leased at historical highs...
“Contrary to what some commentators might believe, our industry is very much of the view that the Australian dream of home ownership should be accessible to everyone. We certainly don’t take any comfort in the current record prices that we’re seeing, primarily because they’re being driven by a lack of supply. We would much rather be selling or seeing 10 happy buyers buying 10 suitable homes than having one happy buyer and nine very disappointed buyers missing out, which is what’s happening in the current environment.
“There’s a plethora of quantitative data out there which outlines the significant challenges in the current market. Even where I am, in my home town of Hobart, last week we hit a median house price of around a million dollars, which is just unheard of. This is being driven by Australians escaping the cities, interstate and international competition, and a very strong preference for houses over units or apartments.”
The REIA president added that the issue had been compounded by a lack of supply in market – as well as a lack of supply of new homes – suggesting that “we haven’t been building enough homes over the last couple of decades”.
Moreover, he suggested that the tax system was also penalising home owners.
“[W]e are definitely talking about putting taxation around housing on the table. With all this talk about negative gearing, let’s put it on the table. That includes capital gains tax concessions and stamp duty in particular,” he told MPs.
Mr Kelly suggested that the stamp duty needed at the time of purchase to buy an average home in Melbourne or Sydney is “about half a year’s salary” for many people.
“All the state governments have said, ‘We haven’t raised our stamp duty rates’, but of course they have because it has been bracket creep by stealth purely in rising house prices,” he told the committtee.
“[T]he states have had since 1900 to get this sorted. It was promised to us that these inefficient taxes would be removed when the GST was introduced and they never were. Now here we are at this point, and I can honestly say, hand on heart, because I am still working on the tools – I am out there at open homes – and I meet young people today who have given up. These are 25, 26-year-olds. They have good jobs but they can’t even come close to saving for the deposit and the stamp duty, which all need to be paid upfront in cash at the time of purchase. It makes me wonder how we got to that point but here we are...
“There is an uprising of young people out of there. They’ve had enough. We have reached that tipping point for stamp duty... Let’s get it all on the table and agree on something, because the last thing we want, particularly with regard to tax, is different states going off and doing different things at different times, with different rates of land tax. What that does is distort the value of property in different states, and I am not sure that is going to work too well in the longer term.”
Mr Kelly therefore suggested that the government should seek to overcome the affordability challenges by:
- Remove “the punitive taxation on Australian homes and households”
- Build more houses
- Putting together a national plan, led by the federal government
The REIA president conceded that while a national plan would be difficult to implement across states as “you can get to the point where there are too many cooks”, he added that the broader issue was that “at the moment, we have absolutely no plan at all”.
“That is why we have ended up in the space that we are in. The pandemic has obviously tipped us over the edge. Who would have thought that we’d have this housing problem in the middle of a pandemic when last year all the forecasters were saying it was going to end up the other way?” he said.
“To answer your question directly, it needs to be a simple plan, probably not getting too bogged down in planning around what and where, because you could spend years trying to decide what the appropriate plan should be. What we would like to see is for the federal government to take some leadership and aim to establish the plan. The national cabinet structure which was used during the pandemic, to us, by and large seemed to work pretty well. So perhaps it could be that sort of structure. Let’s get the state housing ministers all in the one room and let’s get this sorted once and for all.”
[Related: Home-ownership schemes a ‘catch-22’: REA]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.