Wednesday, October 19, 2016

House prices: Even the treasury chief is a 'Mum and Dad bank'

So concerned is the head of the Treasury about the cost of housing, he says he is having to help out his own son, and that parents like him are endangering their superannuation.

"It's a worry, the Bank of Mum and Dad," Treasury secretary John Fraser told a Senate estimates hearing.

"I talk with people my age, and the Bank of Mum and Dad is becoming more and more prevalent. It has impacts on superannuation, where superannuation is going to, it has impacts on why people are saving in their older years, to fund their children's housing needs. And not just purchase, but often rents.

"I am not talking not just about young people entering the housing market as young professionals, I am talking in particular about the lower income people. It's an area that I do worry about."

The latest CoreLogic index shows Sydney house prices have climbed 11 per cent over the past year, and Melbourne prices 9 per cent. Sydney apartment prices climbed 13 per cent and Melbourne apartment prices 9 per cent. In the past five years Sydney prices have climbed 60 per cent and Melbourne prices 27 per cent.

Asked why it was happening and what could be done, Mr Fraser said he had four Treasury officers working on it full time.

Part of the reason for high prices was planning regulations that constrained the supply of land. Another part was the role of increasingly wealthy buyers in bidding up prices for everyone else.

"A big factor is that the wealth is in houses," he said. "And this is the cycle that we've got: high house prices, high wealth, and people feel more comfortable about taking on more debt."

He said before taking on more debt, buyers should ask themselves how they would cope if their income was hit, or if they lost their jobs.

The former London merchant banker said housing was moving out of reach all around the world.

"I was in London recently, and at the pub the issue is the same: how much you've got to give the kids in order to get them a start," he said.

"In London, you've got no hope. I had a son who was there as a primary school teacher. There's no way he could have been a primary school teacher in London unless someone was picking up the tab for his rent, and that's happening more and more.

"'I don't take any joy that we have this housing situation."

In The Age and Sydney Morning Herald