”In responding to housing economics evidence,Australian housing policy actions seem to perfectly meet Einstein’s test of madness,in repeating the same actions and expecting different results,” the researchers said.
A federal royal commission into Australia’s housing future was required,they recommended,given how few “coherent policies” were in place across the country to deal with all the factors behind the surge in house prices.
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The national cabinet of state and federal leaders set up to deal with the coronavirus pandemic should have a permanent housing committee to deal with policy co-ordination,they said,while the federal cabinet should have a specific minister responsible for “housing policies and outcomes”.
All governments should end stimulus measures aimed at the market and instead focus on the social rental sector.
The researchers also recommended the Reserve Bank’s mandate should be expanded to include “maintaining a more price stable and well-functioning housing market”. The Reserve Bank of New Zealand was recently directed by the Ardern government to take into consideration the housing market.
A major issue identified by the research,to be released on Tuesday,is the level of household debt:Australians are among the most indebted in the developed world. The researchers said the rise in debt increased national economic instability.
Australian Bureau of Statistics data shows the average new loan reached a record $635,300 in NSW in April,an increase of $35,000 over the past 12 months.
In Victoria,the average new loan is now $523,000,up from $488,000 in April last year,while the average loan for a first time buyer is at a record $451,500.
“Residential investment can ‘crowd out’ investment in more productive activities and lead banks to prioritise lending to housing consumption and ‘rent seeking’ investment with no positive feedback into economic productivity,” the researchers found.
Another issue is the growing dependence on the “bank of mum and dad”,with the report noting that the chances of young people being able to buy homes was increasingly dependent on the financial status of their parents.
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In a separate report into the global housing market released on Monday,the OECD said house prices across much of the developed world had grown so fast and by so much that they were eating into ability of households to pay for other essentials such as health and education.
It found Australian house prices had experienced the fourth largest increase in after-inflation prices across the OECD,up by 120 per cent between 2000 and 2020. Only New Zealand,Canada and Sweden experienced bigger increases.
“House prices have typically risen faster than average incomes,and households have borrowed more and more to buy their home,so that the burden of mortgage servicing has become heavier for many households despite lower interest rates,” it said.
The OECD said prices for Australian housing,which ranked second only to the United States in terms of its adverse environmental impact,was being pushed up by a lack of supply and restrictive land use laws.
“Restrictive land-use governance criteria that depend on too many categories and excessive prescription on allowable activities have played a role in limiting land supply,” it said.
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