Illustration by Lisa Vu
Declan Williams / Left Wing
On every level, it is clear that young people are finding it difficult to enter the housing market. There are two major problems identifiable, among a raft of many issues: investor bonuses and the local job market.
Currently, investors purchase properties that are Positively or Negatively Gearing.
Positive Gearing is lesser seen in the market, it is effectively a home that tends to be in a low capital growth area with a high rental yield (usually found in the country or rural areas of Australia), the property generates more cash than the investor is paying in borrowings and fees.
Negative Gearing is more common, and far more controversial. In this scenario, an investor purchases a property where their rental income is less than their costs of borrowing and fees. They then claim the cash flow loss against their tax. Considering that these properties are almost always in high capital growth areas, they are in a situation where their wealth increases, while their tax diminishes.
The third thing we must consider is the Capital Gains Tax discount. Capital Gains Tax is where a tax payment is made on the profit from the sale of an asset. However, under the discount, there is a 50% reduction in the tax if the asset has been held for more than a year.
Have you ever seen an article about somebody buying a property for cheap and flipping it for big bucks after just a year of holding it?
Capital Gains Tax discount.
Negative Gearing and the CGTD need reform urgently. Negative Gearing should be limited to new housing (with of course no retrospective stripping of Negative Gearing), as this will drive investment growth into new housing projects; encouraging more affordable housing to be built.
The CGTD should be lowered from 50% to 25%, with of course all previous sales being unaffected and fully grandfathered. This will not apply to small business, to encourage their growth and promotion. This could lead to up to a $32.1 billion improvement in the budget over a decade.
The job market is where a strong element of the problem arises. We take the view that investors are squeezing out desperate workers looking for their first home, which, undoubtedly, is rife. However, many of these workers aren’t at auctions to compete against investors. Why?
Banks don’t tend to loan money to people who have little or no job security.
1 in 6 jobs are at risk of computerization/automation by 2030, including butchers, labourers, bank tellers, admin roles and hospitality workers. University graduates can expect to be, on average, competing against 32 other graduates for one job vacancy.
We have seen the rise of ‘labour hire companies’ that have managed to screw workers out of secure, full-time employment into conditions of casual work, less pay, no superannuation and thus much easier conditions for an employer to lay off said worker.
Commonplace unpaid internships, falling full-time employment, higher casual positions, over 1 million people in temporary employment, youth unemployment at 13.3%, wage growth dwindling at 1.9%, housing prices on average increasing up to 11% per year, 1 in 5 youth workers out of work for more than a year, a 20% underemployment rate for youth, and to top it off, a Liberal government-supported penalty rate cut.
Do I feel that young people are finding home ownership difficult?
To answer the question bluntly – no, I don’t feel that young people are struggling to find secure work, to attain a decent loan and to beat out the deep pockets of investors.
I know it.
Liam Straughan / Right Wing
I am an enthusiastic reader, and have recently spent many a nice Sunday afternoon, much like the one during which I am writing this column, reading Scott Pape’s The Barefoot Investor.
The primary goal from reading this book is to save for a property to own and call home.
The issue of housing affordability for young people has become a hot-button issue in the context of Australian politics. Our Federal Government seems to have taken the hint that it is currently difficult for us to achieve the goal of owning our own home, and looks set to step in.
The following are two things I think should be taken on board by the Coalition in the May Budget on the issue of us being able to buy a house.
In our own state, I will give credit where it’s due to the Andrews government on eliminating stamp duty for first-home buyers. Over the next fiscal year, people who are purchasing properties worth up to $600,000 catch a lucky break. This will likely save each of us up to $8,000 per annum, and allows us to focus on the almighty deposit needed (a bare minimum of $50,000!).
Stamp duty and speed cameras are, for the most part, revenue raisers, with little to no impact on our habits.
We still want a comfortable home and want to get our money’s worth where we can. The Real Estate Institute of Australia agrees.
In 2000, first-home buyers in Melbourne had the choice of 53 affordable suburbs to live in (source: domain). In 2017, there are only seven. We need to see an increase in the amount of suburbs our generation can afford to live in – without breaking the bank.
I believe this can only be achieved by allowing the expanded use of land outside the major capital cities through land purpose deregulation.
The permits needed to build houses on land ripe for development must be made easier for developers to obtain, if anything is to be done. More inner-city highrises alone just won’t cut it.
The benefits will be reaped when more money is injected into the housing market by our sheer numbers alone. People aged 18-40 make up approximately 37.1% of Australia’s population, according to SBS.
These actions alone would take a great burden off our shoulders and ensure the continued profitability of the housing sector, through the influx of a demographic currently all but excluded from the market… ours.