You remember the CBA off touting overseas to try to encourage more foreign investors to inflate the ludicrously overpriced Australian housing market so that even fewer Australians can buy their own home?
Two additional details from the last few days.
The first is a report that
Credit ratings agency Fitch says it will stress-test the impact of steeper home prices on Australian banks’ debt, sending shudders through financial stocks.
I’m not surprised – the reason the market is so inflated, is that it’s filled with additional debt to the banks. And as that bubble grows, the economy becomes even more vulnerable, and the consequences of reality hitting even more devastating…
The second is hardly news to the many Australians locked out of property ownership, but perhaps a wakeup call to others: “Soaring rents fuel city’s poverty crisis”. Perhaps some neocon has a blame-the-victim reason for why the poor deserve to be pushed further and further behind, but it seems profoundly unjust to me.
I mean – could you live like this?
The report found that a couple with two children who earn the minimum wage – plus standard family Centrelink benefits and Commonwealth Rent Assistance – will spend 38.2 per cent of their income on rent for a three-bedroom house. The picture is bleaker for single parents with one child, who will spend 70.7 per cent of their money on a two-bedroom flat, leaving $141 a week for other expenses. Pensioners in one-bedroom flats would have to survive on $83.80 a week after paying out 77 per cent of their income on housing.
$83 a week to live on. Less than $12 a day. And that’s the pension, what we pay to people too old to go out to work – people who have no alternative options whatsoever.
The thing about the inflated property market and the stressed rental market is that obviously they’re linked, and tackling one properly will help tackle the other. Encouraging investors to buy up existing homes makes things worse for renters, because the investors inflate the market for each other as well and borrow more money against the also inflated equity in their existing homes which they then need to charge on to their tenants – tenants who, because the investors have bought up all the properties and priced them out of the market, are stuck renting and have no alternatives.
I’m not making this up:
Experts said negative gearing, a lack of rent regulation and the declining real-term value of Commonwealth Rent Assistance were fuelling the crisis.
On the other hand, part of the solution – to the problem of investors in the housing market preventing Australians buying their own home – is to make being a landlord less attractive. Improve rights of tenants over landlords. Tenants presently have very little security – there are several ways they can be kicked out with notice considerably less than three months – and they are unable to treat their homes as actual homes. They can’t just put up a picture on the wall, for example.
Well, change that. Improve renters’ rights; reduce those of landlords (perhaps with exceptions for those expanding the housing stock by building new properties). Help out the people we’ve effectively forced to be tenants and, at the same time, make investment properties less attractive. And the landlords who have a problem with it can go put their savings into some other area that doesn’t cause so much damage. Which will help slow down the problem, while in the short term helping out its victims. Two birds slugged with the same stone!
It’s not the whole solution by any means – Howard’s halving of capital gains is a major driver, and the first home buyer grants are diabolical in looking like they’re helping while actually making matters much worse – but it’d be a start.