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Do the two sides of politics want more affordable housing or not? They would die before they admitted it, but if you judged them by the way they’ve behaved, no, they don’t.
What they’d like is to live in two worlds at once. A world for home owners where house prices kept roaring up to the skies, and a world for would-be home owners where house prices kept gently falling.
The impossibility of living in both worlds at the same time explains why they invented the clumsy and pompous term “housing affordability” – which allows them to allude to the possibility of falling house prices without having to say the word. The trouble is that in the real world, you can’t do what pollies would love to do: have their cake and eat it.
But if you force them to choose, the pollies will always go for rising house prices. Why? Arithmetic. The number of voters owning their home far exceeds the number of voters who, at that point in time, are seriously trying to afford a mortgage.
This is my best explanation of why our politicians have allowed our housing industry to get into the terrible state it’s in. Do you realise that the median house price in Australia is roughly double the median price in America? Do you reckon that makes us twice as well off as the Yanks? If the houses are of comparable size and location and quality, only in our dreams. We’ve bid our prices to twice the level they’ve bid theirs to.
We’re living in our own little expensive Australian bubble. Our kids are having to take on mortgages that are about twice the size Americans kids have to take on.
Why hasn’t the government done something to stop this mad auction? Because so many punters love seeing house prices rise.
Of course, to every action there’s a reaction. In this case, for us, it’s been the establishment of the bank of mum and dad. You’d think that, by now, parents having to shell out for their kids must be starting to wonder whether the game we’re playing mightn’t be a bit crazy. Our kids need special help because we, along with other oldies, have been ripping them off.
Just bad luck for kids in families that have too many kids to be helped, and the children of parents who’ve never been able to afford to buy a home in the first place.
Keep this up and it won’t be long before we’ve divided Australia in two alien sections: a smaller, ever-shrinking number of people who own their home, and a larger, ever-expanding number of people who don’t. And this from a country that used to pride itself on its high rate of home ownership.
But not to worry – sort of. This craziness can’t continue. Because it is literally unsustainable.
You’d expect house prices to rise roughly in line with other prices, or with people’s incomes but, in fact, they’ve been rising much faster than incomes for decades. In America’s case, the median house price is about 4.8 times the average annual income. In Australia, however, it’s now about 9.7 times.
Obviously, the higher the multiple, the harder the home is to afford. So at some point – probably the point where the bank of mum and dad lies exhausted on the ground – house prices will have to stop growing faster than incomes and maybe fall back a bit.
What did we do to cause house prices to rise so quickly? Lots of different things. We just let it rip and this is what happened. And, since rising house prices pleased so many existing home owners, we let it rip some more.
