Wednesday, April 22, 2009

Affordable housing? That's what they wanted before the crisis

Now they want a set of skyhooks

Jessica Irvine in today's Sydney Morning Herald:

"Labor has undergone an about-face on housing policy. The contrast between pre-election posturing and the reality in government is stark.

On July 27, 2007, the Labor opposition hosted a "housing affordability summit" in the main committee room in Parliament House. About 150 housing experts from all over the country braved Canberra's winter chill to discuss solutions to the housing affordability crisis.

I was there. There was little agreement on what needed to be done, but summiteers were unanimous in what shouldn't be done. Everyone agreed that increasing the first-home owners grant would simply result in higher house prices.

Labor seemed convinced and produced a discussion paper quoting the chief economist at ANZ, Saul Eslake, saying: "Anything which puts additional cash in the hands of buyers … results merely in more expensive houses."


Andos said...

I guess that policy suffered from a direct head-on collision with the GFC.

Now, how to get cheaper housing without devaluing the majority of Australians' largest assets...

Anonymous said...

House prices are up about 200-300 percent in the last 10 years and incomes are up about 50 percent.

Something has to give. Either the housing bubble implodes or deflates, or time to ramp up incomes.

The Labor/Liberal solution of supporting and encouraging the housing bubble via increased FHB Grants (many say FHB Bribes) as well as the freebies that go with the NRAS (developer's banquet of cash giveaways ($2000/yr) and tax credits ($6000/yr) linked to the cpi of all things) has got us nowhere.

Aus has one of the biggest housing bubbles left standing.

Prop it up some more? or let it stand or fail on its own merit - without further govt support?

The Weatherman said...

I heard Rory Robertson of Macquarie pitch a compelling argument to the effect that people owning just one house are square to the property market, those owning two or more are long while people who don't own a house are short.

As there are far more people in Australia who own none or one house than there are who own two or more, on this basis most people should welcome a property price fall, or be indifferent to it.

hrgh said...

"Prop it up some more? or let it stand or fail on its own merit - without further govt support?"

Or soften the fall at a time when the economy reeeaaallllyyy doesn't need the asset deflation and associated drop in consumer spending / rise in household savings?

Anonymous said...

hrgh is right. It's a right mess and prices have to come down, but it will be better for the economy as a whole if it is gentle. A modest drop and a long stagnation that lets inflation reduce the prices would be less damaging than a deflationary panic.

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