INTHEBLACK September 2021 - Magazine - Page 47
WHEN GOVERNMENTS INTERVENE
Over the past decade, the Australian
Government’s solution to housing affordability
has taken the form of grants for first home
buyers, building schemes and incentives to
encourage people to save for a deposit for their
first home.
Far from making home ownership more
accessible, these schemes “add fuel to the fire”,
says Sharam.
Murray agrees and says these are the sorts of
policies governments announce when they “don’t
want to do anything serious about the housing
market”. However, Murray is not a fan of
manipulating the asset price through tax settings,
and sees this as a political “hot potato” that no
government would touch.
The housing market is already worth
A$8 trillion, he says. “If you try to intervene in
that market to halve the cost of housing, there’s
A$4 trillion disappeared off the balance sheets
of the wealthiest 60 per cent of home owners,
concentrated in the wealthiest 18 per cent who
are landlords, and it’s a political impossibility.
“There’s never been a wealth redistribution in
history that large without a war or a revolution.”
“AUSTRALIA
DOES NOT HAVE
A COHERENT
NATIONAL
HOUSING
POLICY, AND
THIS IS UNLIKE
MANY
COUNTRIES
THAT SEE IT
AS A VERY
IMPORTANT
DUTY TO HOUSE
PEOPLE.”
DR ANDREA SHARAM,
RMIT UNIVERSITY
Instead, Murray floats the possibility of a “parallel
system” in which the property buying and investor
classes are untouched, but the federal government
opens “a secret door” to the market at cost price.
“For example, a national housing developer could
build 50,000 dwellings a year [on the condition] that
they can only sell to people who don’t already own
housing, at construction cost price with a discount line,”
he says. “Then, you flood the market with supply.”
This kind of approach is not without precedent.
Government intervention in Singapore has allowed
residents to access secure housing in an affordable fashion,
Murray says, through its Housing and Development
Board (HDB). The HDB offers flats for sale for a
subsidised price, and there are tight regulations around
selling and renting out your HDB home.
Murray points out that, in Singapore, about
80 per cent of people live in government-built
housing. “Essentially, they have created what we have
in our public health system, but for housing,” he says.
In Mainland China, Shanghai residents wishing to
buy a house need to go through a newly announced
lottery system that scores them according to their
need for housing. Under the rules, announced earlier
this year, preference will be given to families without
existing housing. A five-year ban on the resale of new
houses has also been announced to cool the market in
Shanghai.
New Zealand has recently introduced strong
measures to rein in its runaway housing market, with
an extension to the investor holding time to receive
tax offsets – known as the bright-line test – from five
to 10 years to curtail investor flipping.
While acknowledging the New Zealand market
was overheating, Elinor Kasapidis, CPA Australia’s
senior manager tax policy, is not convinced the
proposed tax changes are appropriate or “will be
effective to cool it down”.
“The supply and demand of residential property is
a complex issue and warrants a considered response,”
she says. Property investors who don’t need to borrow
to fund their purchases will be unaffected by the loss
of deductions, Kasapidis maintains.
“It’s hard-working New Zealanders trying to get
ahead by purchasing an investment property who bear
the brunt of this change,” she says.
“The extension of the bright-line test…is not
unreasonable, but may suppress turnover in much the
same way the imposition of stamp duty does
in Australia.”
intheblack.com September 2021 47