Government’s housing affordability headache

Australia’s Treasurer Scott Morrison has promised to tackle housing affordability in the Budget. Picture: Lukas Coch/AAP


THERE are concerns within the Government it has over-boomed the coming Budget as the answer to housing affordability problems.

The fear is that expectations have been raised to a level which the Budget will not meet.

The concerns have emerged as a noted economist has warned that bigger mortgages needed to buy a home will mean more workers will still be in debt when they retire.

Treasurer Scott Morrison has consistently said there was no simple fix to rampant real estate price rises, but has said the issue will be a major element of the Budget.

“It will deal with the challenges in housing affordability from those who are reliant on social housing in our community, all the way through to those who are trying to break in to the first home ownership market,” Mr Morrison said on Sky News on March 5.

However, the basic Budget difficulty is that the deepest affordability problems are in Sydney and Melbourne and a Federal Government’s measures apply to all housing markets. It is hard to target individual areas without disrupting the market in others.

But the Budget could include “incentives” to states to increase the supply of housing land and to reduce the cost of housing development.

The Federal Government also is looking at tempering high demand — which can force up prices beyond the reach of first-home buyers — and so far has cracked down on big-money foreign buyers who have exceeded investment limits.

But it has ruled out changes to negative gearing which encourages investors able to outbid first-home hopefuls.

There is only a limited range of options it has to address the two biggest capital city markets without disrupting smaller markets.

There is no proposal before the Government to allow buyers to use their superannuation savings to buy a home, sources have confirmed to news.com.au.

However, research by independent economist Saul Eslake has found that retirement savings increasingly will be the only way to pay off a home.

He has found that over the past 20 years the proportion of 55-64 year olds still paying off a mortgage has tripled to 45 per cent

Those aged over 65 still in housing debt rose from four per cent to nearly 10 per cent, Mr Eslake told Radio National today.

“That’s going to become much more commonplace now as more people still have mortgage debt outstanding when they go to retirement,” he said.

“They will increasingly use their super to pay off mortgage debt which means they won’t have it to fund their retirement.”

Meanwhile, the Housing Industry Association is forecasting we will be spending more money on doing up the houses we already own, as new-home construction declines.

Renovations currently account for about a third of all residential building work but by the end of the decade is likely to represent some 42 per cent of all residential building activity.

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