Expert Opinion

Joining the mortgage club shouldn’t feel like putting on a financial straitjacket, but that’s exactly how it feels for a generation of existing and aspiring homeowners.

Home ownership used to be an Australian rite of passage. It symbolised security and shelter, the stepping stone to family life, and for many, a financial stake in the future. Always more than just bricks and mortar, the Australian home was also the idealised place to raise your kids, build a veggie patch, create some memories, be the king of your castle, and grow old with loved ones.

Yet for many it has become a financial noose. A straitjacket in which homelife is no longer what you live for, but the mortgage. Homeownership has become the toughest of masters. One that demands huge sacrifices such as the discount wedding, a delay in child creation, and the narrowing of education choices for one’s children. The compromises previously required to enter the housing game never used to be this stinging, but today they have become Australia’s darker rite of passage.

Our firm grasp on these symbolic life decisions slipped approximately 30 years ago when the gap between the median house price and median annual income began to widen. What was once three times median incomes is now over ten times. And today we have a situation where not only does Australia have the most expensive housing in the world, but a creeping fear of owning it.

This chasm between income and housing has devastated the sacred Australian social contract of achievable home ownership. Saving for a deposit can now consume the best part of a decade, paying off a home loan can last a lifetime, and unrelenting rate rises can devastate even the most responsible family budgets.

In isolation, each represents a body blow to attractive affordability. In combination, they’ve brutalised the Aussie dictum that if you work hard and save your hard earned, you can one day own your own home. In short, it is all starting to seem a bit too hard.

This new status quo cannot be allowed to stand. For if it does, our chance of restoring hope and desirability to the Great Australian Dream will be lost. A reset in policy and thinking is required. And symbolic fiddling at the edges won’t do. Nor will attention grabbing reform announcements that lack dedicated and accountable follow through. We need immediate, deliberative, and committed action. And we need it now.

The first move we must make is returning our focus to what is truly important. If an existing policy directly undermines housing affordability, then it must go. This involves doing away with harmful financial barriers to ownership like residential stamp duty and unhelpful market interventions like restrictive land release. These policies both prioritise other government goals ahead housing
affordability – namely tax revenue and urban consolidation. Therefore, if we are genuine about reversing the long-term trend in affordability, we need to begin winding back the factors that are worsening it.

Second, new models must be pioneered to help young Australians enter the housing market. And in pursuing them, Governments need to reframe their paternal tendencies and put their faith in the
decision-making competence of young people. The obvious place to start is loosening the rules around superannuation access. The balances in Australian superannuation accounts belong to the account holders, not the superfunds. It therefore stands to reason that the account holder should have the final say over when their funds are accessed and how they are invested.

Buying a house is not the same as going to the races. Rather, it is just one of many respected investment classes we are normally free to invest in. It’s time we trusted young people to make long-term judgments about their own financial futures. The best way to do that is by adding personal homeownership to the list of permitted superfund investment choices.

Finally, government needs to pay closer attention to the advice of industry on how to stimulate housing construction. The Australian housing pipeline is at its lowest in a decade and there are plenty of ways we can widen the development channel. Reforms like reintroducing ‘off the plan’ tax relief, targeted land release in restricted capital city markets, waiving property taxes for social and affordable housing developments, and reducing the withholding tax rate on build-to-rent housing projects are all measures that can immediately improve investment flows into our lethargic property industry.

When one brushes aside the spin and nostalgia surrounding the Great Australian Dream, what it really boils down to is hope. The dream of a better future where everyone who wants a stake in it, can earn one. Sadly, with fear beginning to edge out hope, the universality of Australian homeownership is at risk. We cannot allow that negative momentum to build. We must act now. And I hope our leaders will.

Paul Cicchiello is the National Director (Communities) for the diversified national property development group, Goldfields.