It’s your housing crisis, states tell feds

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The central bank has left the cash rate on hold at 1.5% in March. CommSec expects the RBA will likely stay on the interest rate sidelines throughout 2017.

State Governments want more action from the Federal Government on house prices.

STATE governments are holding the Federal Government responsible for the big solution to the housing affordability crisis hitting major capitals.

Treasurer Scott Morrison is under increasing pressure to use powerful taxation levers in the upcoming Budget to move the market away from investors and in favour of first-home buyers.

That could mean reducing capital gains tax relief, and limiting or removing negative gearing tax concessions.

The pressure increased today as the Reserve Bank left interest rates untouched while warning that in some areas home “prices are rising briskly” and falling in others.

It forecast more apartments would be available over the next few years, said rent rises were slow, but pointed to a pick-up of borrowing by investors.

“In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years,” said the RBA statement.

“Growth in rents is the slowest for two decades.

“Borrowing for housing by investors has picked up over recent months. Supervisory measures have contributed to some strengthening of lending standards.”

These was no indication of house purchases getting closer to the reach of workers enduring stunted wage growth.

The states are arguing they can only do so much to increase the land available for new housing, and that the big effort to help newcomers in the real estate market has to come from the federal arena.

“Currently the Commonwealth’s tax policies in things like negative gearing and capital gains tax concessions benefit investors not first-home owners,” Victoria’s Treasurer Tim Pallas told Radio National today.

“And really what we’re seeing as a result of that is buying a first home is harder than ever before.”

Mr Pallas said the Federal Government had to recognise its tax policy was “adversely distorting the way the market operates. And it’s working against the interests of first-home buyers”.

Essentially the states insist they can do only so much by increasing land supply to counter rising demand and prices.

This week the Victorian Government announced a range of measures to boost home ownership including release of 100,000 housing sites in growth corridors.

The measures also included the scrapping of stamp duty on purchases under $600,000 by people intending to live in the property and first-home buyers.

A duty exemption for investors in new properties has been scrapped.

The state also has imposed a one per cent tax on vacant housing which are part of an owner’s “land bank” — an asset kept for its capital gains, not to rent out.

Estimates are some 20,000 uninhabited homes are in Melbourne alone. A $500,000, unoccupied unit could cost the owner an extra $5000 a year on top of land taxes and other charges.

The Victorians also have introduced a shared equity pilot scheme in which $50 million will be spent buying 25 per cent equity in 400 homes bought by first-home owners who can repay a mortgage would were unable to save a deposit because of high rents.

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