So far in the election campaign, the parties have not had anything to say about an issue that concerns a lot of people – housing affordability.
The Coalition made some moves in this direction a couple of years ago, when it introduced the First Home Saver Scheme ad restricted foreign investor access to the local residential property market. But it has been pretty quiet on the issue lately,
Labor has announced that it will provide greater incentives for developers of build-to-rent housing, in a bid to provide greater certainty and stability for long-term renters. But, like the Coalition, nothing directly addressing affordability.
A new study on the deposit gap in our major cities includes a discussion of policy options that could help frame the discussion. Despite the significant falls in residential property prices in Sydney and Melbourne over the past year, many people are still struggling to overcome a big deposit gap, according to new research.
A survey put together by CoreData, with analysis by PwC Australia, found that 79 per cent of so-called “key workers” (nurses, firefighters, teachers, paramedics, emergency workers) in Sydney and Melbourne believe that home ownership is not achievable for them.
One in four are looking to either move out of the major cities or change careers. The average wage of a key worker is $76,000.
With low interest rates, people can service a loan. But key workers find it hard to save the deposit.
The report estimates that it takes a single income key worker more than 12 years in Sydney and more than nine years in Melbourne to save a 20 per cent deposit. In Sydney’s “inner ring” (within a 10 kilometre radius of the CBD) it would take 28 years for a single income key worker to save a deposit.
The report was commissioned by Teachers Mutual Bank and mortgage insurer Genworth. Teachers chief executive Steve James says: “We are potentially looking at a drain of key workers from Australia’s two largest cities, when demand for their services s growing.”
House price falls have not been enough to ease the affordability crisis. PwC’s analysis found that a 50 to 60 per cent decline in prices would be needed before key workers could contemplate a home purchase within a five-year timeframe.
The problem created by the deposit gap has a number of consequences, with 47 per cent of those surveyed working overtime (twice the proportion of the general population), 23 per cent moving in with family or friends to save, and 29 per cent delaying childbirth.
It also creates problems for the broader community, with fewer key workers living in parts of our biggest cities. “Allowing an exodus of key workers from these cities to go unaddressed will exacerbate the issue of service shortages as these cities continue to grow,” the report says.
PwC says some policies implemented in other countries have been effective, including the UK Key Worker Living Scheme, which substitutes a government funded equity loan for a deposit. The government loan is interest free for five years. This program assists about 8000 people a year.
The report puts forward a number of policy options. These include allowing key workers to deduct deposit costs, or borrowing costs, from taxable income. Deductible borrowings costs could include premiums for lenders mortgage insurance, loan application fees, conveyancing, property searches and valuations.
Another option is to allow key workers to offset deposit costs against stamp duty.