Wednesday, 30 September2020
|The Federal budget is set to be handed down next week and, as usual, we are concerned about the Treasurer pump-priming land markets. |
As Prosper President, Catherine Cashmore, described in a recent interview with Martin North, the Australian property sector has taken on “too big to fail” characteristics in the minds of the public. “…[People] have been breastfed on the notion that the way to get wealthy, to secure your retirement, is by owning property. “Land tax and vacancy tax has now been waived [by the Victorian state government], confirming what we’ve been taught –that the government will always bail out the property sector.” “When you have an economy that is bent towards land speculation, then to get out of a financial crisis as quickly as possible, unless you are going to reeducate the population that speculation on property is risky and not the way to secure your future –you’re going to throw everything at the housing sector.
Australia has become dependent on high house prices to sustain new housing construction, which is why new supply hasn’t resolved affordability pressures for first home buyers or renters. In her recent Henry George address, Nicole Gurran stated: “The concern is, from the construction industry perspective, that we’re not having a demand signal to produce the houses that we still need, notwithstanding the fact that we’re having a drop in immigration and in demand, we’ve got all of that unmet [affordable] housing need that the market was unable to meet in good times, and isn’t able to meet in bad times.”
Now is the time to put aside ineffective market boosting policies like homebuyers grants and plug the 305,000 shortfall of affordable rentals by funding social housing construction. Catherine also makes the point that the rumoured $10bn infrastructure spend will ultimately feed into land prices (paywall). More money for ‘hard’ infrastructure– tunnels, bridges, airport trains etc. combined with fast-tracked development approvals, means further impetus for states to get their value capture regimes sorted out. However, many economists want cash directed towards ‘soft” infrastructure — early childhood and aged carers, and the smashed-to-smithereens higher education sector. Along with a social housing spend, a soft infrastructure spend makes sense because the people employed in these sectors–women, young people, and casuals– have borne the brunt of the COVID shock.
It does not augur well, however, when 18 months out from the financial sector ‘perp-walk’ that was the Hayne Commission, the Treasurer flags changes to responsible lending standards. The move to cut responsible lending laws from the National Consumer Credit Protection Act has been derided by consumer advocates. The Consumer Action Law Centre stated that the changes were “a solution in search of a problem”, as there’s no apparent stymie to credit flow and the banks are not complaining. We think Real Estate Institute president Adrian Kelly found the problem when he said the reforms will positively impact the housing market, “By improving demand, the government is giving prices less chance to fall.”
And of course, we wonder what proportion of the $33.5bn of superannuation paid out under the COVID-19 early release scheme is sitting in bank accounts waiting to be put towards a house deposit… Throwing demand-side fiscal stimulus on top of rate cuts while removing barriers to responsible lending. Who benefits? Targeted assistance for owner-occupiers to ride out recession may be warranted, but we should not be bailing out speculators.
Yours in hopes and dreams, Emily & the Prosper Team.