Housing affordability is a hot topic everywhere you look. While West Australians have been less affected than our eastern state counterparts, the term ‘rental crisis’ is one we hear and see used frequently by property commentators as a way of highlighting hardships faced by renters and first homebuyers.
President of the Real Estate Institute of Australia and former President of the Real Estate Institute of WA (REIWA), Hayden Groves, had a lot to say on this topic this week. He stresses that “every other approach to addressing housing affordability is edge-tinkering compared to the central factor – lack of supply.”
The point is, the fact that demand for housing currently exceeds supply is precisely why we are seeing rising rents and house prices, pushing renting and home ownership ever further out of reach.
Mr Groves further maintains that while the McGowan Government has introduced a number of “helpful” initiatives like its First Home Loan Deposit Scheme, which helps first homebuyers into the market with as a little as 5% deposit, as well as other grants and schemes, and has committed to provide thousands more social houses, they are missing a key area that would have greater impact – encouraging more property investment. Mr Groves says that’s because property investment supplies most of the rental stock in the market.
He says, “WA property investors remain relatively shy at around 20 percent of all new loan commitments, less than the long-term average of 30 percent and about half that of NSW’s 40 percent. Privately owned properties that are rented represent 27 percent of all homes in Australia.
Yet, there remains a policy imbalance that focuses on social housing that represents only 3 percent of the housing spectrum. The $875m due to be spent on more social housing is necessary but will go nowhere near addressing demand.”
So rather than offering mum and dad investors incentives to invest in property and supply affordable housing for rent, they are penalised with high stamp duty. Furthermore, Mr Groves says federal tax settings (negative gearing and capital gains taxes) are nowhere near generous enough to encourage more investment.
“Worse-still, our state government is considering changes to tenancy laws that will further disincentivise private property investment, putting even more pressure on supply,” he says.
He questions why governments at state and federal level seem so determined to undermine private property investment when it is so central to the whole issue of housing affordability.