For years, people have been talking about how high house prices are, how you can’t get into the housing market without the bank of mum and dad. How it is virtually impossible to rent, save a mortgage, and then actually buy a property without placing yourself in housing stress.
The cries for change have been ringing around Australia for many, many years as the younger generation have realised that they can’t break into the housing market because the prices are too high.
To be quite frank I have no idea how people manage to get loans for the prices of the houses they are buying. Whenever I talk to a mortgage lender there is no way I can afford a loan to buy an average house, valued between $1.1 and $2.1 million in Byron Shire.
There is no way I am ever going to save $220,000, needed for a deposit for a house on the lower end of the market, on my wage – ever.
We are in a distorted market, the proposed changes to the capital gains tax (CGT) and negative gearing (NG) are looking to reform a market, that is currently weighted in favour of the wealthy, to provide a slightly more even playing field for people who have become locked out of the housing market since CGT and NG were introduced in 1999 by Howard and Costello.
‘Currently, people who earn their income by working, pay more tax on average than those earning income from assets, like investment properties or shares. Put simply, there are more tax loopholes for those who get their income from assets,’ Matt Grudnoff, a senior economist at the Australia Institute said in his recent article for The Point.
Immigrants not the problem
He says that in the proposed Labor budget ‘There was a focus on cutting taxes for people who earn their income through wages and salaries, and young people are more likely to earn their income that way.’
‘We also need to understand that the housing affordability crisis has not been caused by a shortage of supply. Immigration is not driving the problem.
‘Over the last ten years the population has increased by 16 per cent but the number of homes has increased by 19 per cent. The number of homes is growing faster than the population.
‘The problem is not the number of homes but who is buying them. Investors have been increasingly buying houses which has reduced home ownership rates.’
Local MP Justine Elliot told The Echo that in addition to the positive changes to the CGT and NG, Labor was also introducing ‘a new $250 tax cut for every worker, on top of our existing tax cuts and a new $1,000 instant tax deduction being introduced next financial year, an average Australian worker could benefit by up to almost $3,000 by 2028.’
‘The Liberals, Nationals and One Nation are desperately defending a broken system. They offer anger but they don’t offer answers.
‘We’re focused on helping workers, first home buyers, and businesses, so more Australians can earn more, keep more of what they earn, get into the housing market and get ahead,’ Justine said.
Leanne Minshull co-Chief Executive Officer of The Australia Institute agrees, having stated that, ‘It is important to remember that despite how scary vested interests might make them out to be, these changes will help many more people than they hinder. If house prices flatten out lots of first home buyers will be able to get into the housing market. While a small number of wealthy people will pay a bit more tax.’
Dr Aruna Sathanapally, Grattan Institute CEO, points out that, ‘The system has leaned heavily on wage and salary income, so labour income, what you earn from having a job, while providing some really generous concessions to other forms of income.
‘On housing, the important impact of this isn’t necessarily that it’ll bring down prices substantially. We don’t anticipate that it will. Treasury anticipates a price impact of about two per cent.
‘The real impact is in shifting the composition of who buys houses by making the tax treatment less preferential for investors and therefore tilting the balance a little bit more in favour of home buyers, so people who are buying a home to live in it. And so that’s what we can expect to happen over time.’
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